Statutory Auditors (Amendment of Companies Act 2006 and Delegation of Functions etc.) Order 2012
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
I thank noble Lords very much for the exchanges that we have had. I thank the noble Baroness, Lady Hogg, for being here today—I am delighted about that. She seems to have answered several questions for me, which is an enormous help. Of course, there are many questions to answer. This is a very big and wide area, and it affects so many different organisations that it is right that I should receive more questions than I can answer at the moment. However, I shall endeavour to answer some of them. In talking about appointment issues and so on, the noble Baroness, Lady Hogg, has more than likely provided answers but I shall try to respond to some of the questions from my noble friend Lord Flight.
I think that he asked who appoints the senior executives—a point that I think the noble Baroness, Lady Hogg, answered. The FRC is a company overseen by its board and it will appoint its senior executives in line with the best human resources practices. The additional points made by the noble Baroness were very useful and she gave a better answer than mine.
The Accounting Standards Board sets standards for financial reporting and has regard to best practice. This includes reference to international developments—the IFRS—as well as responding to developments and thinking in the United Kingdom. The use of international accounting standards is subject to EU approval, as always. The adoption of international standards, and amendments to those standards, follows consultation with the member states, and the FRC and the UK work closely with the EU and the IASB to influence these wherever they can.
My noble friend Lord Flight asked who the FRC will be accountable to following the reforms. The FRC will continue to be accountable to government and ultimately to Parliament in relation to the exercise of its statutory powers, and it will also be accountable to the key stakeholders, including the investor community, which relies on the quality of corporate governance and reporting in the United Kingdom. The FRC will report annually to the Secretary of State on the exercise of its powers.
My noble friend Lord Flight and the noble Lord, Lord Young, asked where the auditors were during the financial crisis. When considering financial institutions, it is important to note that the primary regulator of those institutions which was most prominent during the financial crisis was the Financial Services Authority and not the FRC. The FRC works closely with the Financial Services Authority with a view to ensuring that regulatory action is taken where appropriate. We believe that the changes to the FRC’s structure will enable it to bring its full resources to address any emerging problem much more quickly and effectively than was done at that time.
The financial crisis has been looked at, as we heard, by the House of Lords Economic Affairs Committee. Although it raised a number of issues relating to auditing, some of which are addressed by these measures, the Government do not take the view that these issues were at the heart of the crisis. The “going concern” issues mentioned by the noble Baroness, Lady Hogg, are important, but there were also failures of prudential regulation. If I have missed anything from those questions, it will of course be picked up by the sturdy band behind me, who have been frantically trying to answer all these questions.
Thankfully, the noble Lord, Lord Young, welcomed this measure before setting off with a flurry of questions, all of them right and relevant. I shall try to answer a few for the moment and then, if it is all right, I will reply in writing. Why is the FRC jettisoning the tried and tested ASB/APB brands, and what effect will this have on the FRC’s capability to influence at an international level? International influencing is a central objective of the FRC. The Government and the FRC recognise the contribution that the FRC’s standard-setting bodies have made, while remaining convinced that the changes proposed are needed to strengthen the UK voice. In the new structure the FRC should be better equipped to tackle the most strategic issues and to provide high-quality thought leadership, as well as continuing to develop excellent technical solutions. Standard-setting is increasingly debated in the United Kingdom, in the European Union and internationally in fora that cover a wide range of issues. The FRC needs to exert influence accordingly in these areas. The FRC board has the experience, the seniority and hopefully, through the new structure that we propose, the authority to do that.
On the question from the noble Lord, Lord Young, on auditors’ independence, the Government and the FRC acted in the wake of the crisis to improve transparency. Furthermore, proposals are now being considered in Europe on this very question. The noble Lord also asked about reporting on corporate governance. The FRC is required to make an annual report on its activities, and that report is laid in Parliament.
Baroness Wilcox
A quick nod from the Box, or a quick “We will write to you”?
Employment Tribunals
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 6 months ago)
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Baroness Wilcox
The fundamental review of employment tribunal rules is being undertaken by Mr Justice Underhill. We will have the report on that shortly. I hope that the noble Baroness will be pleased to read it.
Lord Young of Norwood Green
My Lords, we are not opposed to constructive, evidence-based reform; however at a time when 2.7 million people are unemployed, the Government are making completely the wrong judgment in wanting to make it easier to fire rather than hire people. Slashing employee rights is no substitute for a proper growth strategy. Does the Minister not recognise that removing the rights of workers will only increase job insecurity, which is likely to have a damaging effect on workforce morale and productivity? Would she not agree that giving employers positive advice on employee engagement would be more beneficial?
Baroness Wilcox
The Government are committed to a fair and flexible labour market that helps businesses to manage their staff productively. Nothing in the Bill removes individual employment rights and neither should it intend to. It is very important that we encourage businesses to take on more staff. That is what we require. That is what we all need, but we need a flexible workforce and flexible employers so that, as the world changes around them, they can make the changes that they need.
Apprenticeships: Ethnic Minorities
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
My noble friend does wonderful work making sure that dyslexia stays at the very top of my agenda, and he knows that we are working hard to see if we can get the right access criteria for dyslexia. Yes, we will continue to look at any group of young people who are being excluded from work. We cannot afford to have anybody out of work at the moment.
Lord Young of Norwood Green
My Lords, while we support the Government’s objectives in focusing on apprenticeships and the drive to increase their quantity, can the Minister assure the House that the Government will maintain the quality of apprenticeships? I am still waiting for a government response to a Question about a recent “Panorama” programme which showed some rather worrying abuses of apprenticeship programmes.
Baroness Wilcox
As the noble Lord will know following the very good work that he did on apprenticeships when he was a Minister in this department, we have really extended the number and breadth of the apprenticeships that we are doing. I suppose that there is bound to be the odd mistake every now and again, for which we would be very sorry. However, apprenticeships are central to ensuring that our workforce is equipped to help build economic growth and enable companies to compete globally on behalf of us all.
Businesses: Debt
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
I am delighted to be able to say that, after two years, government departments are paying their bills on time. We are paying within five days to the main contractor, which then has to make sure that it pays within 30 days to its sub-contractors. We are watching that very carefully.
Lord Young of Norwood Green
During a House of Commons debate on late payments on 14 September 2011, the then Business Minister, Ed Davey MP, announced that the Government would transpose the EU directive on late payments,
“into UK law in the first half of 2012, which is earlier than we are required to do”.—[Official Report, Commons, 14/9/11; col. 280WH.]
Can the Minister tell us why we are now talking about some time in 2013, given the Government’s commitment to assisting small and medium-sized enterprises?
Baroness Wilcox
It is a long-standing commitment of the Government not to gold-plate European Union legislation by implementing it early. We have confirmed many times our intention to transpose that directive, thereby providing business—especially smaller business—with certainty. We are making sure that it is written as it should be written and in a way that we think it can be enforced. As we know, within the European Community, our problem is that our Anglo-Saxon law here is not necessarily the same law as applies to some of the other countries. Therefore we have to be very careful that what they are going to do is enforceable.
Apprenticeships (Alternative English Completion Conditions) Regulations 2012
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 7 months ago)
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Baroness Wilcox
My Lords, I thank everyone for taking part and asking some interesting and important questions. It is not necessarily the number of people who are in the Room but the questions that they ask, as I have discovered before in the Moses Room. I am always very careful when I see that there not many people here. It is usually the ones who really know what they are talking about who are.
I thank my noble friend Lady Byford for her question and for noting that I come from the fishing industry and am therefore interested. In opposition she led on Defra, so she knows the subject very well. Only sea fishing is covered by the maritime occupations in these regulations, namely share fisherfolk, crew and deck hands. The numbers are small. There were 30 apprenticeships in 2010-11. There has been no demand to develop other types of fishing apprenticeship. Officials will explore the potential to develop this sector further with the National Apprenticeship Service and the sector skills councils.
When I was in the industry I first knew about share fishing when my grandmother left me my little fleet of fishing boats. The captains of the boats said to me, “We’ll be share fishing, then”. I said, “Oh, right”. That meant that I got half of whatever catch came up to pay for the boat, the oil and everything else that was needed, while the other half went to them. It did not work terribly well so I think that what share fishing means has changed nowadays, but that is how it was explained.
It is sad that there is very little demand for apprenticeships in fishing now. I am delighted to see that the National Apprenticeship Service will explore this, particularly since I am involved with the National Lobster Hatchery in Cornwall. There are other ways of being in the fishing industry, along the lines of research into what we used to call fish farming but is now carried out wild at sea. Certainly, in the lobster hatchery it is being done as a scientific project. That area has moved to what look like scientific apprenticeships but are about the fishing industry, which may explain why we do not have more figures than that. I will look into that for my own information and see if we can find a better answer in the future.
My noble friend Lady Byford then talked about the fishing transfer. As she suggested, a fishing apprenticeship would take place over a longer period, as required to complete the training. Six months applies only to redundancy. Those made redundant can transfer their apprenticeship to another employer. However, although a fishing apprenticeship is about going to sea and fishing, in my experience apprentices also spend time on the quay, learning how to look after their nets, selling their catch and learning how to grade their catch. It is not just about days at sea and seamanship but their workmanship with the fish that they catch and the things that they have to use. I hope that that is helpful; it certainly gave me the opportunity to get an answer as well.
The noble Baroness, Lady Sharp, asked about the numbers affected by redundancy. I am told that we do not collect data on this. Surveys tell us that less than 5 per cent of the total number of apprenticeship starts finish in that way. However, we are considering what measures to put in place to collect these data. I thank the noble Baroness for that question.
I come now to the noble Lord, Lord Young. I have a note here from an expert whom I know the noble Lord recalls from his days as a Minister, which says, “A written and, I expect, flamboyant response from John Hayes will follow. However, I will attempt to address some of your questions now”.
As to the “Panorama” programme, my honourable friend the Minister for Apprenticeships has commissioned a detailed investigation into the cases identified by “Panorama” and the National Apprenticeship Service will report in the coming weeks on its findings. We are committed to rooting out and eradicating poor quality wherever it is identified, continuing the work that the noble Lord, Lord Young, and his people did before.
As to the monitoring and review of these regulations, the National Apprenticeship Service works in partnership with sector skills councils and other sector bodies and keeps the need for exemptions under review. The regulations will be formally reviewed every 12 months.
We considered the World Championships with DCMS, but the thinking at the moment is that to include not formally recognised sports would be too open-ended. On balance, we have decided to restrict it to only Olympic, Paralympic and Commonwealth sports. I am sure that if the noble Lord, Lord Young, were to pursue this matter we would no doubt look at it again, if provoked.
Lord Young of Norwood Green
All I was trying to point out is that this year is a good example because the World Championships were definitely a preparatory stage for the Olympics. Indeed, selection for the Olympics often depended on a person’s performance in the World Championships.
All I am making a plea for—I am not expecting this to be a negotiating session and for the Minister to say, “Yes, that is perfectly okay”, because I understand that there will be cost implications—is that it should be recognised that the Olympics come every four years, people prepare for them and that ought to be taken into account. For these sporting excellence apprenticeships, it depends how the phrase about working towards competing in the Olympics is interpreted. Perhaps the Minister will take that aspect away.
It is nice to see a wise adviser, who I remember from my days, still actively assisting the Minister.
Baroness Wilcox
I am sure that he has noted that.
I thank everyone for the time they have given and the contributions they have made. If I have missed anything, obviously they will have picked it up and we will take it back. There is clearly consensus on the underlying principle that apprentices must be employed. These regulations do not undermine that principle but, rather, they acknowledge that there are only a limited number of circumstances where we will accept that apprentices are not employed in order to complete their apprenticeships. Setting out those circumstances clearly in these regulations can serve only to ensure that the vast majority of apprentices will benefit from employed status and will help stamp out the ambiguity that has been a feature of the programme in the past. I commend the regulations to the Committee.
Finance: Equity Markets
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
Either I was too slow or someone else was too hasty. I am advised that the Kay report does not address the question of employee shareholders. Does that mean that the Government will reconsider their previous statements on employee shareholders?
Baroness Wilcox
As I have said and as I am happy to repeat, this is an independent report by Professor Kay. He is able to say what he likes on the whole of this subject and we look forward to what he recommends.
Industrial Training Levy (Engineering Construction Industry Training Board) Order 2012
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
My Lords, I, too, thank the Minister for her explanation of these orders. Generally speaking, we welcome the levy. Indeed, if it applied across all industry we might find another means of ensuring that we had more training and more apprenticeships, given that only 4 per cent to 8 per cent of employers actually employ apprentices. I welcome the fact that despite difficult times a significant majority of both the engineering construction industry and the construction industry still believe that the levy is a valuable and viable way forward.
I certainly concur with the points made by my noble friend Lady Turner in relation to women in engineering. Significant attempts are being made by companies to ensure that more women are involved in engineering, and in getting those women who are involved to go to schools and spread the word that this is an industry that provides useful employment and good-quality careers. The same can be said of construction. We are gradually beginning to see more women. I do not know if my noble friend Lady Turner has had the opportunity to visit the Olympic site and see the apprentices there, but it was certainly good to see more female apprentices involved in the construction stages.
I do not have any additional questions. I did not draw the same conclusion from the consultation outcome as the noble Lord, Lord Razzall, because when I read through it I felt that they made quite strenuous efforts to ensure that they had a widespread consultation. They recognise that a declining number of employers are involved in trade associations so they have gone for a wider survey. I think that the surveys are valid and can be justified. I understand why there has been only a one-year levy ordered, but I welcome the fact that both those levies will be realigned.
Baroness Wilcox
My Lords, I thank noble Lords very much indeed for the short debate that we have had. As soon as I saw the noble Baroness, Lady Turner, stand up, I almost saw the noble Baroness, Lady Platt, standing up with her because when I first came into this House they were doughty campaigners, and still are. The noble Baroness, Lady Turner, may be interested to know that the noble Baroness, Lady Platt, has stayed in contact even though she has to be at home most of the time and has written most encouraging letters throughout her absence, so she is with us in spirit if not in body.
Although the number of women in this field is increasing slowly, the CITB recognises that the number of women employed in construction remains disproportionately low, and it is directly addressing this issue by actively promoting equality and diversity. It was awarded the equality standard in 2011. Gaining the equality standard is a first for a sector skills council. It is also the first time that an organisation working across the three nations has achieved that standard, so things are improving, although there is more to do.
The noble Lord, Lord Young, kindly mentioned the apprentices at the Olympics site. I have been there and met them. It is lovely to see young girls having the opportunity to take on careers which are stretching them in every way. Both industries are health and safety-intensive industries, as the noble Baroness, Lady Turner, said. We have been told by both organisations that offering excellent training and following rigorous standards is a priority, so they realise that there is further to go in that regard. It is good to hear them say that themselves.
It is important that the levies do not place burdens on small firms, as I am sure my noble friend Lord Razzall will agree. That is why we have the exemptions. As I said earlier, 50 per cent of small firms involved in construction will not have to pay the levy. My noble friend asked about the surveys. I think that they were justified. Getting people to take part in surveys nowadays is not the easiest thing, but given the breadth of this issue, I think that a figure of some 52 per cent or 59 per cent is good. I am delighted that the noble Lord, Lord Young, was happy to welcome that.
The combined figures from associations and the sample showed 85 per cent employer support for the levy, so that looks good. The proposals before the Committee relate to the construction and engineering construction industries, as we have just said. It continues to be the collective view of employers in these two industries that training should be funded through a statutory levy system to secure a sufficient pool of skilled labour. I commend these orders to the Committee.
Companies Act 2006 (Amendment of Part 23) (Investment Companies) Regulations 2012
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
The noble Lord assumed correctly, of course, which is excellent.
In answer to the noble Lord, Lord Young of Norwood Green, tax issues have been debated in the House of Commons and are now in place. I have not brought these details with me but I would be very happy to provide the noble Lord with those. I do not think that those details will make a fundamental difference to what we are asking for today. I hope he will bear with me on that. The noble Lord also asked about the corporation tax regime, which gives exemption to investment companies from corporation tax on their chargeable gains if they satisfy conditions.
In parallel, investment companies and their investor-shareholders will benefit from the removal of an unnecessary restriction. Investment companies will be able to pay dividends out of capital profits without losing their ability to benefit from the special distributions regime in the Companies Act.
Unless there are any further questions—
Lord Young of Norwood Green
I asked about risk. What are the safeguards in relation to assessing risk?
Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
My Lords, I will not repeat what was said by my noble friend Lady Hayter, or by the noble Lord, Lord Razzall, so I shall be brief. As my noble friend said, we are discussing a casualty of the quango bonfire. Given the praise that the Minister heaped on NESTA, I wonder: if it ain’t broke, why did we bother to fix it? However, that question was covered by my noble friend.
I have a couple of points. The Minister spoke of staff being transferred. Am I right in assuming that they will be transferred under TUPE arrangements? I see a nod: that is good. I, too, am interested in the question of accountability and found the title of “protector” interesting. It has a Cromwellian overtone, so I hope that it will not go to his or her head. My noble friend Lady Hayter made a point about the fiduciary duties of the protector to ensure that the charitable trust performs its duties and to report to the Minister. I, too, would be interested in the general activities—apart from ensuring financial probity—of encouraging innovation and investment in the kind of areas to which my noble friend referred. If a report is made by the protector to the Minister, will we be able to question the Minister on it? I would also be interested to know how trustees will be appointed in future. I will not comment on the more technical points made by the noble Lord, Lord Razzall, and await with interest the Minister’s response.
Baroness Wilcox
I thank noble Lords for their consideration of the order and will try to answer the questions asked by my noble friend Lord Razzall, by the noble Baroness, Lady Hayter, and by the noble Lord, Lord Young. I can assure my noble friend that there will be no attempt to control how the endowment is spent by the Treasury once the transfer scheme comes into effect. I hope that he will find that answer reassuring.
The noble Baroness, Lady Hayter, asked several questions. I will try to answer most of them. Of course I agree—as I did in my earlier speech—that NESTA has done a wonderful job. The idea is to set it free to be able to do even more. Its objectives were registered with the Charity Commission and the Office of the Scottish Charity Regulator. Perhaps the noble Baroness did not ask about the Scottish Charity Regulator, so I have given her a bit more information than she asked for—but it is jolly nice to know these things.
In answer to the noble Baroness’s next question, once NESTA is reconstituted as an independent charity and trust, it will continue to support innovative companies, both as part of a diversified portfolio invested for financial return and through grant funding and programme-related investment in line with the charitable objectives that have been cleared. I hope that the noble Baroness will accept that reassurance.
In answer to the noble Baroness's third question, the new NESTA trust and charity will be subject—as is the case with all charities—to charity law and charity accounting rules. There are currently four trustees of the charity. The appointment of trustees to the charity will be a matter for the charity itself. We understand that the NESTA charity intends to appoint a number of new trustees in April 2012. It has established a nominations committee to consider the skills and experience required for the board, and is currently running an open applications process for new trustees. There will be no government involvement in that.
I am as delighted as the noble Baroness that half the charitable trustees are women. We will see if that continues—or perhaps it will finish up as an all-women board, whereupon the men will start to complain that they are not getting in anywhere. However, we will deal with that when we get to it. She mentioned that the previous Government had done a lot of work with NESTA, and we have been able to take on a concern that is going extremely well. We think that it will be very happy with this new move.
The noble Lord, Lord Young, asked about the protector—like him, I immediately thought “Cromwell” when I heard the word. There are no plans for the protector’s report to be presented to the House. The Government will continue to collaborate with NESTA in the future. As I said, there is a previous organisation; the model is already in use by the Millennium Awards Trust. We are watching carefully how that runs.
NESTA promotes innovation and creativity to help tackle social and economic problems, and provides the independent, well informed commentary on innovation policy that we have been asked should continue. However, after consideration of the conditions set out in the Public Bodies Act, the Government have concluded that NESTA does not need to be in the public sector to carry out its work. Abolishing NESTA as a non-departmental public body and reconstituting it as an independent charity and charitable trust will give NESTA greater freedom to pursue its valuable activities, which noble Lords have praised this afternoon.
I thank noble Lords for their contributions to this interesting debate, and I commend this draft order to the Committee.
Auditors: EAC Report
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 9 months ago)
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I thank my noble friend Lord MacGregor of Pulham Market for calling this debate. We have heard some well informed and constructive contributions from the House. It has been a particular master class for me, and certainly for my civil servants behind us because they have had evidence today of what a Lords Select Committee can do with a subject all by itself. At the moment, every time we can show how well a Lords committee does, we should do so.
Of course, I will not be responding to the noble Lord, Lord Hollick, who asked my permission to be able to speak and to leave. He therefore knows that I will be writing to him rather than answering his questions while I am on my feet. As we have already heard, my noble friend Lord Lawson decided to let me off the hook today and gave us those seven biblical recommendations that he left us to reflect upon. We will, of course, write to him. As for the rest of the questions from your Lordships, I hope that I will be able to answer a goodly few of them along the way. Of course, I will write to anybody to whom I have not been able to immediately respond.
I start by paying tribute to the Economic Affairs Committee’s chairman, and to the report and recommendations, some of which have already resulted in action. One of the recommendations in the report was that the audit market should be investigated by the competition authorities. As my noble friends Lord MacGregor and Lord Stewartby, and the noble Lord, Lord Currie, noted, within two months the Office of Fair Trading had announced its provisional decision to refer the market for the audit of large companies to the Competition Commission, which plans to publish its provisional findings by the end of November. I emphasise what an important development the Government consider this investigation by the competition authorities to be.
The Select Committee report made several other recommendations. I recognise that the committee expressed disappointment with some of the elements of the Government’s response to its report. It might help if I start by covering two issues where I know that the committee continues to have concerns. The first is the issue of international financial reporting standards—IFRS. Under EU law, listed companies in the European Union are obliged to prepare their consolidated accounts in accordance with IFRS. My ministerial colleague, Norman Lamb, replied to a letter from my noble friend Lord MacGregor on this issue last week; I think that he is coming out with a Statement fairly soon. In line with the conclusions of the G20 last November, we continue to support the aim of a single international system of standards. These will develop with time and aim to address issues, on an international basis, as they arise. The Financial Reporting Council—FRC—is engaged in that process, as are the Government when revised standards come to be adopted in the European Union.
The other area where the committee expressed concern was the need for discussions between auditors of financial institutions and the prudential regulator. The Government continue to support the code of practice that now requires discussions twice a year, with one discussion including the relevant bank. The code of practice appears to be working. For this reason, and in accordance with better regulation, we will not be introducing a statutory requirement. The Government, the Bank of England, the FSA and the FRC all support this. However, we will be watching the issue closely.
My noble friend Lord MacGregor asked what the FSA code of practice requires. The code of practice now requires discussion about each of the banks between the relevant auditor and the prudential regulator twice a year, with one of those meetings including the bank itself. These discussions are happening and the code, as I say, appears to be working. My noble friend Lord Stewartby asked why auditors did not recognise the risks. The banking crisis had a range of causes. More or better assurance alone would not have stopped it, but we have certainly learnt lessons.
The systemic problems that caused the banking crisis have been well rehearsed and include a failure of credit judgment, a failure on the part of central banks to recognise asset bubbles, weaknesses in regulation and deficiencies on the part of credit rating agencies. Audit has never had a financial stability role, and is only one element of the regulatory framework that ensures that we have working capital markets. The issue of systemic risk falls to the regulator, as well as to the boards of companies, rather than to the auditors. In terms of the audit of banks, the Government are committed to the objective of improving bank corporate governance, and will continue to work closely with the European Union and internationally to increase transparency and accountability in a proportionate manner.
I now turn to some other recommendations of the committee, where the Government and the FRC have taken action. On the long tenures of some auditors of large companies, BIS and the FRC consulted separately last year as to how discussions between auditors and audit committees about the appointment of auditors might be improved. Amendments to the FRC’s corporate governance code and audit committee guidance will follow this year. This will include a new requirement for auditor retendering by FTSE 350 companies, on a “comply or explain” basis, every 10 years. My department will publish a summary of responses to the consultation on narrative reporting shortly and we will set out the Government’s position as regards wider assurances of corporate reporting beyond the audit of accounts.
My noble friend Lord MacGregor asked whether the Government are proposing to encourage company boards to form risk committees. Well, the Government are reviewing the structure of the corporate reporting framework. We propose splitting the current single corporate report into two documents: a strategic report and the annual directors’ statement. The strategic report, as its name implies, is strategic. It will allow companies to tell their story, describing their business model, the strategy to deliver this and the risks to this strategy through the directors’ remuneration. It is not the Government’s intention to create legislation to mandate that companies have specific risk commitments.
My noble friend Lord Hodgson asked why we need to change the current narrative framework. The results from the August 2010 BIS consultations, “The future of narrative reporting” and “A long-term focus for corporate Britain”, demonstrated a consensus among respondents that change to the current narrative reporting framework was required. They struggled to glean the key messages from the mass of data presented. We propose to divide the current annual report into two documents. The first is called strategic, as I have already mentioned, and the second—the annual directors’ statement—will contain information that is used by some, but not everyone. Our proposals will, I hope, help companies and investors concentrate on strategic issues for the business, and encourage more integrated reporting, giving a clear line of sight from the company’s results through to its business model, strategies and risks.
On the abolition of the Audit Commission, the Audit Commission announced the award of contracts to outsource its audit work to private-sector providers last week. This was very good news in terms of concentration in the audit market. Grant Thornton, from outside the big four, has been awarded the largest share of new work of any of the recipients. These contracts were awarded on the basis of cost and quality criteria, and demonstrate the confidence we can have in auditors outside the big four.
The noble Lord, Lord Currie, spoke of the need to promote the use of middle-tier audit firms by large companies. At present, under the EU directive, statutory auditors have to be majority-owned by qualified auditors. We are continuing to support an exploration of the likely demand for and consequences of alternative structures, and this might help smaller firms grow. It might also help recapitalise an audit firm in the event of its failure. We recognise that other member states have differing views on this and are continuing to discuss this issue with the presidency and the Commission.
My noble friend Lord Hodgson asked whether the Government are enabling non-big four firms to win public sector work. The answer is yes. The Government are committed to improving value for money from public procurement. We are centralising within Whitehall the procurement of common goods and services, including for audit and assurance. Central government purchases from small and medium-sized companies doubled to £6 billion in the past year as the coalition has pursued its pledge to realign its spending away from multinationals. The shift will see almost 14 per cent of Whitehall’s £44 billion budget secured by SMEs this year, up from 6.5 per cent in 2010.
The noble Lord, Lord Northbrook, asked whether proportionate liability or a statutory cap on auditor liability could serve to encourage more audit firms to bid for large company audits. The Government have no plans to do that. The Companies Act 2006 already allows for contractual limitation of liability, and some auditors’ liability agreements have been signed. The committee supported the exemption of more SMEs from audit. My department’s consultation closed in December, and we will be setting out our response to the findings in the spring. In Europe, we are making the case for raising the exemption thresholds. The committee expressed concern about fragmentation between regulators of audit, accounting and corporate reporting. In October, BIS and the FRC consulted on changes to streamline the internal structure of the FRC and improve its regulatory efficiency and effectiveness. My colleague Norman Lamb intends to make a Statement on this in the other place shortly. On non-audit services, my department has now amended regulations on disclosure of auditor remuneration to bring them into line with the revised ethical standards.
The noble Lord, Lord Shipley, talked of the conflict of interest if one company provides audit and other services and my noble friend Lord Hodgson said that he did not see a problem with it—I thought I would put both those pieces in. In answer to the noble Lord, Lord Shipley, as the committee heard during its inquiry, the standards were revised following the financial crisis. The disclosure framework is now in line with the categorisation of non-audit services in the standards. It also reflects the concerns the committee raised about internal audit services and tax advisory services, in particular, where the regulations ensure separate disclosure will be made. Shareholders can then question the audit committee on the discussions it had with the auditor on those services and the safeguards to the auditor’s independence.
On accounting standards for SMEs, the FRC is continuing to consult on how UK GAAP should be developed, including how it should apply to medium-sized companies. I recognise that I have not covered all of the committee’s recommendations. There were a number of others which the committee suggested should be taken forward as part of the Competition Commission’s investigation and there are others that the commission has voluntarily included within the scope of its investigation.
My noble friend Lord MacGregor spoke about living wills. The FRC has begun work with the six largest audit firms to develop a framework. It will be a sort of “how to” guide by a firm for regulators who might have to dismantle or separate various parts in an orderly fashion.
I would like to answer one of the questions from the noble Lord, Lord Young, because questions from the speaker for the Opposition always come at the very end and rarely get answers. The noble Lord asked about conversations between auditors, banks and regulators. That has been well received in the UK and by banking regulators overseas, which are looking at—or already are—implementing similar approaches in their jurisdiction. I will write answers to the rest of the questions that he asked.
The committee made some proposals that are now reflected in the European Commission’s proposals and which we welcome. These include removing the audit firm ownership rules from the directive, making big four-only clauses ineffective and making audit reports more informative.
As far as the Government are concerned, this has been a very useful debate and I am sure everyone else in this Room has enjoyed every single moment of the two and a half or three hours that we have been doing this. It has been a useful debate on an important subject and I thank noble Lords very much.
Lord Young of Norwood Green
Before the noble Baroness sits down, there was just one area I wanted her to elaborate on. Paragraph 184 is very emphatic. It says:
“We believe that every bank should have a properly constituted and effective Risk Committee of the Board”.
I do not want to go on to quote the rest of the paragraph but that is very firm. Despite the banking crisis and the concern expressed—almost unanimously, or at least by almost every contributor—the Government’s response was that it is “desirable” for banks and other institutions but not absolutely mandatory. It then goes on to say:
“There is a strong presumption that banks and insurers that are included in the FTSE 100 are examples of types of firm that should have separate risk committees”.
In the light of what has happened and the strength of that recommendation, I would like to understand exactly why the Government felt they should not go further than they have done in their response.
Economy: Growth
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 10 months ago)
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Baroness Wilcox
It will not be. They are a wily lot up there in Scotland, and it is for the people of Scotland to decide their constitutional future. The Government strongly believe that Scotland is better off as part of the United Kingdom, and I do not think that I can do better than quote an English visitor in 1750, Mr Amyat, the King’s chemist, who famously remarked:
“Here I stand at what is called the Cross of Edinburgh, and can, in a few minutes, take 50 men of genius and learning by the hand”.
We do not want to lose them.
Lord Young of Norwood Green
My Lords, with record levels of unemployment, is the noble Baroness concerned about the performance of the Government’s flagship growth policy? The regional growth fund was hugely oversubscribed because of the Government’s cuts, meaning that it has created more losers than winners. Will she explain why, of the winners, more than a year after the bidding process began and more than 10 months after the successful bidders in the fund's first round were announced, more than 40 per cent of successful bidders are still waiting to receive their money?
Baroness Wilcox
The regional growth fund has been enormously successful. We are very proud of it, as we are about the number of people who have applied for it. I am sure that it is quite obvious to the noble Lord, as it is to me, that the reason for hesitation from some people is that there has to be due diligence on every bid put forward to make sure that we are not taking taxpayers’ money and investing it unwisely.
Commonwealth Countries: Trade
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 10 months ago)
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Baroness Wilcox
It is my pleasure to acknowledge that. Everyone is working together. We are able to place our experts from UKTI in embassies and missions, and we are extremely grateful to them.
Lord Young of Norwood Green
Given the importance that the Government attach to involving SMEs in exporting, can the Minister tell us what progress has been made in this area in relation to Commonwealth countries and what the strategy is?
Baroness Wilcox
Many SMEs look first to the nearer markets in the European single community because of the shared regulatory regime and the proximity of them. Therefore it takes extra effort on our part to make sure that we help SMEs when they go further afield. We are certainly doing so and I know for a fact that at the Intellectual Property Office we have just started to put envoys into other countries to be able to help small and medium-sized businesses when they try to export to countries to which they would find it quite daunting to export if they did not have the help of the Intellectual Property Office and the embassies.
Education: Careers Advice
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 11 months ago)
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Baroness Wilcox
The National Careers Service is being put together to answer pretty well everything that the noble Lord, Lord Roberts of Llandudno, has just suggested. We know that the careers advice that has been given up until now has been very patchy, and neither parents nor children have understood what their choices are. We hope that the training and monitoring that we will do will make absolutely sure that schools will get the right advice for children in their area.
Lord Young of Norwood Green
My Lords, having visited a comprehensive school this morning and talked to the lower sixth form, never have I been more reminded of the importance of careers guidance when young people begin to make choices about further education and careers. Is the Minister worried about the comments by the president of the Institute of Career Guidance? He said:
“In reality, the National Careers Service is an illusion, and not a very imaginatively branded one either, and is a clear misrepresentation with regard to careers services for young people … The likely reality is that hundreds of thousands, and possibly millions, of young people will never get access to personalised impartial career guidance”—
I stress those words—
“having to rely on the national telephone helpline or website and school staff”.
I do not expect the Minister to agree with that, but I would expect her to assure the House that there will be a review of the current approach to careers guidance and to ensure that the right level of personalised careers guidance is available to young people.
Baroness Wilcox
We take this issue very seriously. We are putting new money towards it and ensuring that the youth contract will provide nearly 500,000 new opportunities for young people, including apprenticeships and work experience placements. The important thing as far as we are concerned, and our aim, is to get every unemployed young person earning or learning again. We do not think that careers advice has been good in the past and we think it can be improved upon. We are using the original Connexions system to help us to provide a better outcome than we have had thus far. With 1 million youngsters out of work, we know how important this is.
Local Better Regulation Office (Dissolution and Transfer of Functions, Etc.) Order 2012
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 11 months ago)
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Baroness Wilcox
I am trying very hard to make sure that I can answer as many questions as possible. It does not seem that long ago that I was standing in this Room—perhaps it was a couple of years ago—at the birth of the LBRO. At that time, I wondered whether we needed another organisation. Here I am now saying that we do, but that we are going to keep it to ourselves and I am going to be responsible for it, whatever it does. I thought that I had made a very long and detailed speech to try to cover as many points as I possibly could this time round, but obviously all I have done is to provoke people with expertise in this area to come back at me with questions. I hope that I am going to be able to answer them.
The noble Lord, Lord Young, talked about the Federation of Small Businesses. Small businesses want to see greater benefits. One is that we have announced that we will make assured guidance available to them: a benefit of the primary authority. He also asked about the primary authority. The power to direct remains in the case of the primary authority; it is in other guidance where the power to enforce will be removed. He also spoke about the RSG minutes. We have not yet considered publication of the minutes, but we will look at that proposal. It was not raised in consultation, but I see no reason why they should not be published. If there is no great objection, I do not see why he should not have what he has asked for.
The noble Lord, Lord Borrie, said that the savings will be very modest and will not in themselves address the deficit. That is not quite what we meant. The savings, which will be £6.4 million over 10 years, are not insignificant given the financial situation we find ourselves in. I hope I was very clear in my statement that we want to make sure that the excellent work that the LBRO has done continues, but any money at all that we can manage to save by reorganising should be saved. We hope to be able to continue with the same people and do the same work while cutting the overhead costs.
The noble Lords, Lord Borrie and Lord Razzall, talked about the representative steering group’s split responses. The role of the RSG was supported by 80 per cent of respondents and any split responses reflected a debate as to the membership, with many of the respondents actually wanting to be on it themselves. That was the real balance of the argument there.
In reply to the noble Lord, Lord Borrie, on accountability, the RSG will represent a balanced range of stakeholder perspectives and aim to strike the right balance between the regulators and those whom regulation seeks to protect; to provide advice on the strategic direction and approach of the organisation; to provide oversight of the operation of the primary authority to ensure that due process is followed; and to have its membership reviewed regularly and refreshed to open up engagement and encourage new perspectives. It will be no more than 12 individuals, not operate as a formal body and not oversee day-to-day operations of the BRDO, which we hope will add even more to the great work that it has already done.
The noble Lord, Lord Razzall, talked about the property assets. In answer to his question, no—lease transfers will be consolidated with other BIS estates. Sadly, we do not have very expensive property assets that we can get rid of. I note that the noble Lord supported what I introduced today in this regard. On his question about whether employees have agreed to come, yes, all the employers in post at the date of transfer have agreed to be transferred to the department and will continue to work from Birmingham for the foreseeable future. The noble Lord also asked about business sign-up. As he suspected, business had some concerns. We have certainly attempted to listen to those; the operational independence in the primary authority is an important element of that, and keeping the business reference panel is also important. Businesses have questions, but are broadly supportive of the proposals. We will of course continue to listen to their questions and worries as we go forward.
Consistency and continual improvement in the regulatory landscape are essential if we are to progressively strive to provide an even stronger, more supportive environment in which our businesses can strengthen, prosper and grow for the benefit of our whole economy. The needs to support greater transparency and accountability, to create a more effective regulatory policy on development and to provide a strong voice for regulatory reform at the heart of government are not in dispute. This order underpins those objectives, and I therefore commend it to the Committee.
Lord Young of Norwood Green
I may have misheard the Minister when she said that the power to direct local authorities will remain. That is what I thought I heard, but I would like some clarification, because the Explanatory Memorandum is quite clear that the power to direct local authorities goes and the power to enforce service improvement will be stopped. What then remains is just a question of guidance to local authorities, so I would like some further clarification.
Baroness Wilcox
I thought that the answer I gave was that the power to direct remains in cases of primary authority and it is other guidance where the power to enforce will be removed. I shall see whether I can get a clearer response for the noble Lord.
Lord Young of Norwood Green
In that case, I think the Minister needs to clarify the memorandum.
Baroness Wilcox
The powers of enforcement are in Part 2 of the Act, and they remain. In the Regulatory Enforcement and Sanctions Act 2008, Section 7 is repealed, if I have that right. If that is not clear—
Lord Young of Norwood Green
Perhaps I can try to be helpful, because I do not want us to take up more time than we need to, but that is not quite what it says in the Explanatory Memorandum. I notice that the Minister’s officials are nodding. Perhaps the best thing that the Minister could do is to write to us and clarify the situation.
European Union (Definition of Treaties) (Republic of Korea Free Trade Agreement) Order 2012
Debate between Lord Young of Norwood Green and Baroness Wilcox(12 years, 11 months ago)
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Lord Young of Norwood Green
My Lords, I, too, would like to thank the Minister for her statement. I am not opposing this statutory instrument, but I am, like a number of noble Lords, interested in the value of UK trade with Korea. The impact assessment shows a £0.2 billion deficit. Those are the figures under the heading:
“Value of UK trade with Korea”,
on page 10 of the document. In goods, there is nearly £1 billion excess on imports. In services, we have some advantage.
The noble Lord, Lord Dykes, was right to describe the boosting by £500 million a year as somewhat modest. While I do not want to pour cold water on the enthusiasm of the Minister in this area—I note what she said about BIS and Foreign Office Ministers hosting events, which is a good initiative—I would be interested in hearing from her whether BIS and UKTI will give any special assistance to business exporters and potential exporters of both goods and services.
The point that the noble Lord, Lord Edmiston, raised is that these are both—aggressive might not be the right word—enthusiastic and successful exporters. We should not underestimate that. Again, I do not want to sound as though I am opposing the concept of free trade: I am not. But we ought to be cognisant of the nature of competition and understand the importance of giving every assistance and encouragement to our own exporters both in goods and services.
Baroness Wilcox
My Lords, I would like to thank noble Lords for their contributions today. I did rather expect that I would hear from someone with experience and expertise in the motor industry like my noble friend Lord Edmiston. Let us start by recalling that the free trade agreement is an excellent deal overall for the UK—worth £500 million a year in UK GDP. As well as eliminating South Korean automobile tariffs, the free trade agreement contains the most ambitious disciplines ever negotiated by the European Union to tackle non-tariff barriers. South Korea will now accept international standards as being equivalent to Korean regulations, saving considerable time and expense retesting EU cars once exported to Korea.
At the same time, Korean car producers must comply with all EU rules and standards, and the free trade agreement prohibits the introduction of any new unjustified barriers to trade. As well as the EU market access committee, a working group on automotive trade will be established to monitor and increase regulatory co-operation. Furthermore, the European Union has secured a range of provisions in response to the industry’s concerns, including a slower phasing of tariff reductions and a bilateral safeguard clause, which will protect any industry from harm due to the free trade agreement. For these reasons, we believe that the EU has secured a possible outcome and an excellent deal overall.
Lord Young of Norwood Green
Again, I do not want to dispute the £500 million boost that the Minister referred to—I am sure that we welcome that—although the figure is fairly modest. However, over what period of time is that forecast to take place?
Baroness Wilcox
That is a very good question, to which I shall give an answer. On the £500 million each year, that will come into force over time. I hope that that is of some help to the noble Lord.
Business: Ethical Values
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
In response to my noble friend Lord Phillips of Sudbury, the Government agree that principles-based regulation will be an appropriate approach in many cases. There are existing examples of principles-based regulation in a variety of areas, as I am sure he well knows, such as the UK Corporate Governance Code, which contains broad principles against which listed companies are required to report. However, we will continue to monitor this and I will continue to talk to him about it.
Lord Young of Norwood Green
My Lords, does the Minister agree that the high executive pay which the public at large find so objectionable is only one symptom of the real illness, which is the broken relationship between shareholders and managers? How are the Government going to repair this so that the values of shareholders are reflected in the decisions of management, including perhaps having an employee representative on remuneration committees?
Baroness Wilcox
The independent Kay review will be looking at these things, which we have previously discussed and debated. I do not think any of us like to see the distance between remunerations growing wider and wider. There is no doubt that the Government are following this up.
Jobseeker’s Allowance: Interns
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
Yes, I agree with my noble friend Lady Wheatcroft about closer links with employers, schools and colleges, and explaining the opportunities available. Often people miss out on opportunities because they do not know about them. Maybe their home backgrounds have made it impossible for them to know, so it is absolutely essential that we get closer links. I do so agree with her.
Lord Young of Norwood Green
My Lords, following the point of the noble Lord, Lord Razzall, will the Minister say how she will ensure fair and equal access to internships, regardless of parental income?
Baroness Wilcox
There is fair and equal access to internships. We will watch to make sure that we continue it. We have made it clear through updated guidance what internships must provide to comply with the law. As the noble Lord knows, guidance for employers is at businesslink.gov.uk; and guidance for individuals is at direct.gov.uk. There are plenty of places where people can go to make sure that they have got the right information.
Employment Law: Unfair Dismissal
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
Gosh. I am afraid that I do not have the details of the answer to that question, but I will write to the noble Lord.
Lord Young of Norwood Green
My Lords, can the Minister explain how watering down people’s rights at work by doubling the service requirement to claim for unfair dismissal from one to two years is a substitute for a credible plan for growth? As the Chartered Institute of Personnel and Development, the professional body, has confirmed, that is not the way to boost jobs and growth. There is no empirical evidence to suggest that such a move will boost job creation and it is highly likely that this change will lead to more people bringing discrimination claims instead, which have no service requirement. Can the Minister confirm that the two-year proposal is part of a consultation process? She seemed to be describing it as a done deal.
Baroness Wilcox
Yes, it is part of a consultation process, and we believe it is the way forward. The previous Government did not, I think, have a particularly good record. This has become more and more of a question, and we feel that ACAS and other bodies that can help in discussions before problems get too large would be a much better way than having to lose a job, start a job and have a relationship between an employee and an employer that is not working. We think that there are ways to do this other than going to court.
Loan Companies: Interest Rates
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 1 month ago)
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Baroness Wilcox
When the consumer credit review report comes out, we will know its findings, so I cannot comment on them for the moment. However, it is always the most vulnerable who we must worry about because they are the least likely to ask for help until it is too late. We will continue, as we would always continue, to make sure that the disadvantaged really are a priority for us.
Lord Young of Norwood Green
My Lords, can the Minister advise the House on whether the Government have any plans for regulating commercial providers of debt management plans, which have never been regulated and under which consumers pay upfront fees and take longer to pay off their debts? Does the Minister agree that there is a real need for free and impartial debt advice such as that provided by the Consumer Credit Counselling Service?
Baroness Wilcox
We certainly agree that there should be free debt advice and we will continue to provide it. I think the noble Lord also asked about debt management companies. We are concerned about these. The Office of Fair Trading has recently taken action in this area and we are working with the industry itself on how we can resolve these issues. Good people in the industry do not want the bad people in it because they give them all a bad name.
Apprenticeships: Dyslexia
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
I agree with the noble Lord. My father was an apprentice and he, too, became a journeyman, which is a wonderful thing. Perhaps we can find a use in that way. I will take this back and discuss it, and will come back to the noble Lord.
Lord Young of Norwood Green
Can the Minister guarantee that, given the importance of assisting all disabled people, especially the young, and the record levels of youth unemployment, there is sufficient budget to achieve this objective? If the Government have found a spare £250 million to spend on weekly bin collections, would it not have been better spent on encouraging more than the current 4 per cent of employers to provide apprenticeships?
Baroness Wilcox
I think the noble Lord knows that we are taking forward the work that he started and I hope that he is pleased with the way we are doing that. We are allowing the money that is needed to do this work, which is so important to us. There is no question that the bins come first.
Public Procurement as a Tool to Stimulate Innovation: Science and Technology Report
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 3 months ago)
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I am grateful to the noble Lord, Lord Krebs, for bringing forward this debate and for highlighting the potential of public procurement to drive innovation.
The speeches of noble Lords both on and outwith the committee gave me much food for thought. We could all be here until about 7 pm if I tried to answer all the questions put forward this afternoon. I shall try to answer some as I go along, but I shall of course write regarding the others—that is, if the civil servants are still friendly enough towards some of the people around this table today. However, I am sure that I have confidence in their ability to answer those questions.
It was lovely hear about prizes—the noble Lords, Lord Hunt and Lord Rees, talked about the historical precedents here–—to get things going for the risk-taking and the jump-starting. It made me think of the most reverend Primate the Archbishop of Canterbury, who is going to stand down next year perhaps after struggling for 10 years. He started off by launching a prize for theological writing, which at the time I thought was an excellent idea. Let us see how good these prizes are in taking things forward and away from the traditional practices that we have used.
The noble Lord, Lord Young, rather shamefacedly had to spell out the sorry state of public procurement in this country. It is the system that this Government have inherited. I can assure him that by the time we have finished being in government we shall leave it in better heart than it is in now.
All public procurement must achieve value for money for the taxpayer. This is essential to managing the fiscal deficit that we face. The Government recognise that by procuring innovative products and services they can both improve the efficiency and delivery of public services and provide opportunities for UK business to grow. Both outcomes will benefit our economy.
With this in mind, the Government are currently carrying out a reform of public procurement to increase efficiency, value for money and transparency. Doing this will enable us to better plan procurements to drive innovation. It will also enable us to use more innovative procurement mechanisms that can deliver innovative products and services. This programme of reform will help to maximise the conditions for encouraging and fostering innovation that delivers value for money. I will highlight some of the key elements of this as we go through.
The noble Lord, Lord Hodgson, gave us a masterclass from the private sector investment area, and then started talking about intellectual property. As the Minister for Intellectual Property, I would be only too delighted to talk to him in my office about the way universities are going ahead and putting down what they should do. We have already had a response to that this afternoon.
The noble Lord, Lord Kestenbaum, talked about the Government as intelligent customers. I am very taken with that description. I shall take that away and, as with many of the things I have heard today, see whether we cannot benefit from some of the marvellous speeches that we have heard.
In response to the noble Lords, Lord Willis and Lord Kestenbaum, and the noble Baroness, Lady Warwick, I should say that the procurement capability of the public sector was a key feature of the Select Committee’s report. A change in culture and direction from the top must challenge this risk aversion. The new departmental board structures as detailed in the Government’s response to the committee’s report will help to drive forward this cultural change and it is a start. I hope there will be agreement on that at least.
The noble Baroness, Lady Warwick, asked what new initiatives are in place to engage SMEs in public procurement. To quote one in response, all central government contracts over £10,000 must now be advertised in Contracts Finder, central government’s procurement portal, and this will give greater visibility of procurement opportunities to SMEs. Suppliers can flag up instances of poor procurement practices, including overtly bureaucratic tender documents that lock out SMEs. The Cabinet Office will investigate these instances through its mystery shopper scheme.
The noble Lord, Lord Warner, asked about planning in best practice. The reform of public procurement that is currently under way will mean greater focus is placed on planning, on properly identifying what is needed and on how best these needs could be met by exploring different options before the formal procurement process starts. This includes thinking about long-term value for money. We will ensure best practice from these changes is shared across the various departments.
I return to the capability improvement programme and the SBRI. The programme will help to raise the level of expertise across central government to ensure that public procurers have the right skills to deliver what is expected of them. Part of it includes a commercial interchange programme, which is currently running as a pilot and is designed to facilitate two-way commercial skills and knowledge exchange between government and industry. I am sure we will find that very helpful. There have been seven placements to date, including one at the Department for Transport.
I should like to mention the small business research initiative and the forward commitment procurement model—two procurement mechanisms covered by the committee’s report. I shall update noble Lords on the small business research initiative. Since the reformed programme was launched in April 2009, various departments and other public bodies have run more than 60 competitions. These have been in many areas, including: defence, where we have sought to improve the energy efficiency of operating bases and to reduce the weight that individual soldiers need to carry; healthcare, where we have developed technologies for detecting asthma in children and the means of reducing healthcare-acquired infections; and sustainable construction, where we have installed sustainable technologies in more than 50 social housing units and developed more efficient and easily recyclable lighting technologies. To date, more than 600 contracts have been awarded to technology-based businesses to a value of just over £41 million. Sixty-seven per cent of these contracts have been awarded to micro-businesses—those with less than 10 employees—or small businesses, which have less than 50 employees. These businesses are typically the cadre of companies with which the public sector has the greatest difficulty contracting.
I should also mention that the Technology Strategy Board, which manages the small business research initiative scheme, is constantly engaging with public sector organisations to get greater engagement in the programme. The most recently launched competitions are in the areas of food security and animal research.
The committee’s report mentioned that the forward commitment procurement model is not currently as widely used as the small business research initiative. This is true, and we are seeking to expand the programme. The Government have recently started a project with the private sector to develop private-public forward commitment procurement compacts.
In addition, following the success of the zero-waste mattresses project with Her Majesty’s Prison Service, which was mentioned earlier, a second project has led to the development of an ultra-efficient lighting solution for use in hospitals, which we will demonstrate at the Building Research Establishment. We intend to use this as an opportunity to generate wider interest in this mechanism.
I turn now to the Department for Transport, which was a particular focus of the committee’s report. Since the start of the inquiry, the Department for Transport has introduced several new measures to ensure that it is able to identify opportunities for procuring innovative solutions. For example, it has established a board-level investment and commercial committee, which provides oversight and scrutiny of major commercial and investment decisions. The chief executive of the Highways Agency is a member of the committee and is therefore able to offer the benefit of the Highways Agency’s innovative thinking to the broader department—an area that was highlighted by the committee’s report.
The Department for Transport recognises that small and medium-sized enterprises are a source of innovative ideas and is keen to encourage solutions from them. It has published an action plan with specific targets and measures designed to provide real opportunities for small and medium-sized enterprises to meet its business needs. The department held a product surgery for small and medium-sized enterprises in June. It also participated in the Government’s innovation launch pad, offering mentoring support to small businesses to develop innovative solutions for public services. The department is also considering the development of supply chain charters to encourage fair treatment of small and medium-sized enterprises by prime contractors.
The noble Lord, Lord Krebs, asked how effective central government is in encouraging the take-up of these initiatives. They are being taken up across local government, so there is some hope there.
I know that this debate and the recent government response are starting to show that the Government recognise the important role of public procurement in encouraging innovative solutions in the public sector that deliver value for money.
The noble Lord, Lord Krebs, said that he will return to this topic with his committee. I am very pleased. If I could stand here and say what I personally think about a lot of things that have been said today, I would no doubt get the sack immediately. Certain things strike such a chord with me. When I started working with the Civil Service, it took me a while to realise that in the private sector, in business, where I come from, the biggest talent—certainly in a FTSE 100 company—is always in management, and writing wonderful reports and giving you all the information you need is regarded as something that you can buy in almost by the hour. You come into the Civil Service and it is completely the reverse. People who can write public policy are top of the heap and the people who do management are not.
I am not saying that one way of doing this is better than the other, but somewhere along the line, if we are to get public procurement right, we have to bring the two sides nearer to each other. It would be rude indeed to say that people are too far down the food chain to be taking such enormous decisions that have such a long-term effect. Some of the contracts that I have seen are enormously long. Some of the payment terms that I have seen have been idiotic. I have seen one that paid the main contractor on five days sight of invoice and he was paying the small businesses that contracted to him on 30 days sight of invoice. If that had happened when I was in business, he would have been out of the door tomorrow morning, but that is not how it can be run.
I have whistled through this. I have answered very few questions. We will write to answer the questions asked and when we come back the next time that the noble Lord, Lord Krebs, brings a committee report here, I hope that noble Lords will know that the Government are aware of the problems of public procurement. We will address it better than the previous Government did. As many noble Lords have said, the prize is enormous if we can get this right. I again thank the noble Lord, Lord Krebs, and his committee for bringing this debate here today.
Lord Young of Norwood Green
Before the Minister sits down, I could not let go her answer that I was shamefaced; I was not shamefaced about our record. It was a difficult task and we made significant improvements. I am only too happy to wish the Government success in building on those improvements. I am certainly not shamefaced about some of the initiatives that we took.
I hope that I might get an answer—if not, no doubt she will answer in writing—about the pan-apprenticeship scheme.
Baroness Wilcox
Ah! One moment. That I do have, and I will be delighted to give it to the noble Lord. As he knows, because we stand opposite each other many times at many times of the day and night, I certainly did not want to appear rude. It was tongue in cheek, but the truth is that his Government did not do terribly well in 10 years, and we have to make a better fist of it.
The noble Lord requested more information on the feasibility of introducing an apprenticeship scheme to improve Civil Service procurement skills. As this is a Cabinet Office lead, I will liaise with my colleagues in the department and write to the noble Lord with more details. As he knows, apprenticeships are close to both our hearts.
Construction Contracts (England) Exclusion Order 2011
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 3 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Young of Norwood Green
My Lords, I welcome the comprehensive statement read by the Minister. We do not see this as a matter of controversy; its origins lie before the 1997 election and it continued until the 2009 legislation. We do not see the proposals as controversial and we do not intend to oppose them. I tend to agree with the noble Lord, Lord Razzall, on PFI contracts. If I had one other comment to make, it would be to ask whether there would be an impact regarding the participation of SMEs in these contracts, something that I know the Government see as desirable. With those comments, I await the Minister’s response.
Baroness Wilcox
I thank noble Lords for their patience in listening to the great amount that I had to say on the order, but I felt that we could not cut it shorter because it is important stuff. Clearly, the private finance initiative is something that generates strong feelings. I have experience myself in business of a PFI contract. The noble Lords, Lord Razzall and Lord Young, have referred to PFI, but the exclusion order that we are debating today is simply a technical exercise to acknowledge the fundamental differences between private finance construction contracts and traditional construction contracts. It does not concern the wider policy landscape. I asked the same questions myself, and it does not, so I can reassure noble Lords on that. Of course, we will look at it again if circumstances change.
The noble Lord, Lord Young, mentioned SMEs. Measures to help SMEs by promoting cash and simplifying dispute resolution are under consideration anyway, as the noble Lord would have expected. As he rightly said, the Government are very concerned about SMEs and their future. I thank both noble Lords very much for their interventions; I am grateful. I hope that I have dealt with the key points that they made and I commend the order to the Committee.
Dyslexia
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
As the noble Lord will know, the education Bill is currently going through the other House and will introduce many things. When it completes its passage a duty will, I hope, be placed on schools to make sure that there is good independent advice, particularly on careers. However, we are carefully monitoring the position at the earlier ages to make sure that all our children have equal opportunities. We really aspire to equal opportunities in this matter as well.
Lord Young of Norwood Green
My Lords, I recognise what the Government are doing in relation to this particular problem. However, there is a huge demand for apprenticeships generally and for apprenticeships for people with disabilities specifically. Does the Minister agree that it might help if the Government stipulate the need for apprenticeships when they let procurement contracts, placing a special emphasis on those with disabilities? Should they not act similarly in relation to government departments?
Baroness Wilcox
I was very interested to hear the noble Lord’s suggestion. I wonder why he did not do it when his people were in government.
Baroness Wilcox
You did, did you? Okay, then I have no doubt that we are carrying it forward, as we do with many of the things that you did. What support is available for disabled apprentices? Additional funding is available, and we are taking forward the work that you were doing in the past. I am sorry, that was cheeky.
Manufacturing: Investment Growth Forecast
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
I will be—that marks the divide between expansion and contraction. That is the lowest reading since September 2009. What steps are the Government going to take to ensure that British manufacturing is able to respond to an environment where the value of sterling should enable it to have a competitive advantage?
Baroness Wilcox
We are having a competitive advantage in countries such as China and India, where we are growing. That is very important to us. Competing with our European colleagues is one thing, but taking new business abroad from the BRICs is even more important to our country at this time.
Groceries Code Adjudicator Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
The whole reason for bringing in the adjudicator will be to arbitrate in disputes between the large retailers and their direct suppliers, and to investigate possible breaches of the grocery code, which has been in place for a year now. Of course, when there is a group of very big supermarkets together, that is a worry. That is the whole reason for putting this in place and I am sure that the noble Baroness would want this to go through as quickly as possible.
Lord Young of Norwood Green
My Lords, we welcome the Bill and the assurances received. The Minister said that only direct applications from suppliers can be made to the adjudicator. Why will the Government not consider trade associations? The Government have allowed anonymity in terms of representations, but allowing trade associations to make a direct representation on behalf of suppliers would be a valuable source of evidence for the adjudicator to consider.
Baroness Wilcox
I have no doubt that as the Bill goes through, the noble Lord will stand up and put these points to me. I am absolutely sure that everything will be considered. At the moment that is exactly what we are doing: looking at every possible way of getting this right for our country.
Businesses: Regional Growth Fund
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
The evidence is that we have been overwhelmed by the number of bids that have come in. For the second round that we are in now, there is an enormous number of bids, which is very heartening. It is competitive, and people are doing awfully well with it. I hope that I can speak later to the noble Lord and reassure him on this with the evidence that we have.
Lord Young of Norwood Green
My Lords, given the record levels of youth unemployment, is the Minister aware of the newly released data from the Federation of Small Businesses showing that only 8 per cent of small businesses have taken on an apprentice in the past year? This is concerning, given that in 2009 more than half of the apprenticeships took place in businesses with fewer than 50 employees. Furthermore, the federation believes that allocated funding to apprenticeships must be used to benefit micro-businesses—that is, businesses that are likely to take on their first apprentice with the potential to grow. It believes that the Government should better promote group training agencies or apprentice training agencies.
Baroness Wilcox
My Lords, I expected this question to come from the noble Lord, Lord Sugar, whom I see is in the House today. My answer to this question is that this is a challenge fund and projects can cover whatever the bidders want. The aim of the fund is to create jobs and these could include apprenticeships—a key part of this Government’s growth agenda. We look forward to bids coming forward for apprenticeship growth.
Export Control (Amendment) (No. 3) Order 2011
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
My Lords, we have been round this statutory instrument track before but I congratulate the Minister on a comprehensive report. I am now a lot more knowledgeable about sodium thiopental and pancuronium bromide—clearly a word with which the Minister had trouble. It was a comprehensive report. I was not aware of the precise usage of these particular drugs and we welcome the fact that there is both a direct and indirect control. That is important.
I have one question before I conclude. In paragraph 8—the consultation outcome—it rather strangely says:
“Following a short general industry consultation, the trade between the UK and the US on these products appears to be negligible”.
Does “appears to be negligible” mean that they were not satisfied with the process of validation? If the Minister cannot answer today, I would welcome a response in writing.
We on this side share the abhorrence of the noble Lord, Lord Thomas, of the death penalty. He reminded us in graphic terms what it is like for individuals facing that fate, which is unfortunately still too common in many countries around the world. The fact that we can play a small but important role in ensuring that we do not contribute towards a practice that all of us in the House abhor is important. Apart from my one minor question, we, too, welcome this statutory instrument.
Baroness Wilcox
My Lords, I am grateful to my noble friend Lord Thomas of Gresford for recounting his personal experiences as a distinguished lawyer on the subject of execution and I thank him for his support for the order. Yes, the noble Lord, Lord Young, and I have been round these statutory instruments before, but I am grateful to have his immediate support for this one. I apologise for my pronunciation of some of the drugs. I am not up on it—and I am very happy not to have been up on the names of those particular drugs.
As to the question of the noble Lord, Lord Young, about the words “appears to be negligible”, I have it here that there should be minimal if not zero legitimate trade in these drugs. Our consultation has shown that there is no trade. I am sorry, but my official could not understand what was written and I cannot read the reply, which is very embarrassing. I shall try again. It should be “minimal if not zero”; there is no trade.
I am sorry that I made such a fist of that when all I had to do was say that I hope I have dealt with the key points made by the noble Lord and that I commend the order to the Committee.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, Amendments 1 and 2 seek to introduce new requirements into Clause 2. On Amendment 1, as we have discussed previously, Post Office Ltd has developed a clear strategy to deliver a commercially self-sustaining business while maintaining a network of at least 11,500 branches. This Government have allocated a funding package of £1.34 billion which will allow Post Office Ltd to deliver this strategy, as part of which Post Office Ltd has been clear in its ambition to become a front office for both local and central government. The Government fully support Post Office Ltd in this, as does the National Federation of SubPostmasters.
The National Federation of SubPostmasters realises that this strategy, along with the other elements of the Post Office’s plan, such as the introduction of Post Office Local outlets, must succeed in order for the Post Office to become the vibrant business we all believe it can be. Indeed, the National Federation of SubPostmasters stressed the importance of the front office for government strategy last week, when welcoming the publication of the Co-operatives UK report on options for a mutual Post Office. The front office for government strategy is already under way and the Post Office is working hard to develop competitive, innovative services targeted at both local and central government. It is also engaging with a number of departments, agencies and local authorities to develop the role it will play, particularly as all parts of the Government plan how to deliver their services in new and increasingly digital ways. This is beginning to yield results.
Only yesterday, the National Federation of SubPostmasters welcomed the beginning of a pilot scheme which offers document verification for pension applications across 106 post offices in the north-east. I welcome it too. The Post Office, the National Federation of SubPostmasters and the Government all agree that this is simply a good start and that more work should follow. It is therefore good news that the pilot is actually just the first of three planned pilots with the Department for Work and Pensions, which has set out that it will continue to work with the Post Office to explore opportunities for delivering welfare in the future, including universal credit. The Post Office has also been successful in its bid to provide registration services as part of an initiative to enrol local authority employees into a government employee authentication service.
The annual report on the Post Office network required under Clause 11 will provide ample information regarding its progress in delivering government and other services across its network, and that will be provided each and every year. I see no benefit in duplicating the information in the report to be delivered on a Royal Mail transaction. As such, and due to the reassurance I have given on the progress that Post Office Ltd is making in securing new government business, I hope the noble Lord will feel able to withdraw Amendment 1.
Lord Young of Norwood Green
My Lords, I thank the Minister for her words. I will obviously study the detail of them. I found them helpful and I do feel able to withdraw Amendment 1. In my desire not to take up too much time, I did not speak to Amendment 2 which, with the House’s indulgence, I should like to address.
Lord Young of Norwood Green
My Lords, I certainly concur with the points made by my noble friend Lady Drake, and I shall not repeat them because once again she has covered the waterfront on that issue. I want to take the opportunity to say, first, that we welcome the constructive approach of the Government Front Bench, led by the noble Baroness, Lady Wilcox, with her ineffable charm in listening to the representations, in bringing forward a number of appropriate amendments and assurances. Our every wish has not been granted but I did not expect that that would be the case.
I pay tribute to the many noble Lords who have contributed to the debate and I would single out two: the noble Lord, Lord Low, who unfortunately is not in his seat, but I am sure that it will be conveyed to him, and my noble friend Lord Clarke, who is not with us today. He reminded us how much of his life has been invested in what we both joined as the GPO. It is also traditional in these cases to pay tribute to the Bill team, who have served us very well. I was reflecting that it was led by Jo Shanmudalingam—I probably have her name wrong. I do not know whether she is in the Box today, but I know that she is expecting her second child. I could not help reflecting that some mothers pay a lot of attention to what babies hear when they are in the womb, and play them Mozart. I am thinking of this child who has been exposed to House of Lords debates, whose first words, instead of “Mama” may be “My Lords”. The only hope is that she will grow out of it, or it might be a career destination. In any event we thank the Bill team.
My final piece of advice to the Minister is to remember what they put on the side of fragile parcels or packages, and the same goes for this Bill: handle with care.
Baroness Wilcox
I shall start by giving my last response on this Bill to the noble Baroness, Lady Drake, and reassure her, I hope, that there is no change in policy. Clause 18 allows for the RMPP to be divided into different sections to reflect the restructuring of the Royal Mail Group Ltd under Part 1 of the Bill. We do not have powers to create a separate pension scheme. However, in the fullness of time it is possible that the businesses might wish to alter the pension arrangements by transferring a section of the RMPP into a new stand-alone arrangement. Any such change would need to meet the safeguards provided under statute and under the scheme rules. The amendment simply ensures that in this event, the information-sharing framework provided under Part 2 would apply to the new scheme as it did to the old section. The trustee would need to consent to any proposal made by the employer to create separate schemes under the scheme rules and under general pensions legislation.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
My Lords, I can confirm that the very purpose of the Bill is to protect the universal service. I should like to put the mind of the noble Lord, Lord Young, at rest on that before I go any further. I hope, too, that I can satisfy my noble friend Lady Kramer in my response. I know that the noble Lord, Lord Low, has spoken to the Minister in another place, Edward Davey. I hope I can reassure the noble Lord on the points he was most worried about.
The Bill requires Ofcom to secure the provision of the universal service and to ensure that it meets the reasonable needs of users. That latter point is a requirement not just of the Bill but of the European postal services directive. On Amendment 64, Clause 32(2)(b) retains the ability for the regulator to make exceptions where the minimum requirements for delivery and collection in Clause 30 need not apply. These are for exceptional circumstances or geographical conditions. Amendment 64 seeks to change the wording to “highly exceptional”. The wording of the clause directly replicates Section 4(1)(a) of the Postal Services Act 2000. It also exactly replicates a provision from the Opposition’s 2009 Bill. It flows from Article 3(3) of the European directive, which states that member states must take steps to ensure the universal service,
“save in circumstances or geographical conditions deemed exceptional”.
The kind of situation that constitutes an exception would be an address on a remote island, where there is a single ferry service a week. It would be unreasonable to expect Royal Mail to deliver every day to such an address, as it would require it to charter its own boat. Another example would be where dangerous dogs at an address pose a genuine threat to postmen or postwomen. Currently this allows Postcomm to permit Royal Mail not to make daily deliveries to some addresses in extreme circumstances. Present exceptions apply to only 0.01 per cent of the approximately 28 million United Kingdom addresses. We agree with the intention behind this amendment—that the number of exceptions must be kept a minimum. However, I must confess to your Lordships that I am not sure precisely what effect saying “highly exceptional”, as opposed to “exceptional”, would have. It would appear to raise the bar, although to what height is unclear. We must recognise that raising the bar is likely to have two effects. First, it will probably result in more risks for hard-working postmen and postwomen, who will be asked to go to a large number of unsafe addresses. Secondly, it will probably put a greater burden on the universal service provider. I have to say to your Lordships that on both counts I am uneasy.
The question I ask your Lordships is whether the current situation is unacceptable. My view is that there is no evidence of a need to move away from what we now have. Indeed, that was the view of the Opposition two years ago. Unless noble Lords opposite can provide us with a rationale for this change, the Government cannot support it. I therefore ask them to consider withdrawing this amendment.
Amendment 65, in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, seeks to prevent a review of the minimum requirements for a period of five years from when this part of the Bill comes into force. Similarly, Amendment 65A, in the name of the noble Lord, Lord Low, seeks to prevent the Secretary of State reducing the minimum requirements—again for a period of five years from when this part of the Bill comes into force. The whole issue of the minimum requirements is something we considered during our deliberations in Committee, and I am sorry that noble Lords were not convinced by my contribution to that debate. As I have said, the power in Clause 33 enhances the safeguards against changes to the universal service minimum requirements. Clause 30 enshrines the current minimum requirements for the universal service, with the important addition of free services for the blind or partially sighted. These requirements gold-plate our European obligations, but it is gold-plating of which we are rightly proud.
As I said during Committee, and as my colleague the Minister for Postal Affairs has said in the other place, the Government have no intention of reducing the minimum requirements of the universal service during this Parliament. As things stand now, and as they would have stood under the 2009 Bill, a future Government could reduce those minimum requirements to the level required by the European directive through a negative resolution procedure using powers under the European Communities Act 1972. This means that, until this legislation is passed, Saturday deliveries could be dropped, and different prices could be charged for sending letters to different parts of the country. We do not believe that that is acceptable, and that is why we have introduced Clause 33. Clause 33 puts in place a clear procedure to be followed before the minimum requirements could be altered. Through this procedure, it offers vital new protections for us all. The protections are threefold, and I think it is important that I set this out again for your Lordships. First, there can be no changes to the minimum requirements unless Ofcom has conducted a review of the needs of users, which would, of course, inform any subsequent Secretary of State’s decision. Secondly, the clause guarantees that no change can result in a different minimum level of service to different parts of the country, so we could never have a five-day-a-week letter delivery requirement in Cornwall, but a six-day-a-week requirement in Birmingham, and services must always be priced uniformly. Thirdly, any proposal for change would be subject to the affirmative procedure in both Houses.
Given these enhanced protections, I am afraid that I do not believe it would be helpful to tie the hands of the regulator or the Secretary of State in the way proposed by these amendments, as mentioned by my noble friend Lord Eccles. Ofcom will be responsible for regulating the postal services market and should be able to review the market and user needs where it feels it is appropriate. Let us not forget that Ofcom’s primary duty will be to secure the universal service. It will need to be able to gather information on customer and market needs if it is to fulfil this obligation. That would include vital information about the needs of vulnerable consumers. This is an important point as one of the general duties of Ofcom under Section 3 of the Communications Act 2003 is a requirement to have regard to the needs of persons with disabilities, the elderly and those on low incomes.
Furthermore, it has been made absolutely clear by both myself and the Minister for Postal Affairs that the Government have no intention of reducing the minimum requirements of the universal service. Even if a future Government believed that changes should be made, the Bill guarantees that no change can result in a different minimum level of service to different parts of the country, and guarantees that services must always be priced uniformly. Critically, any proposal to change the minimum requirements would have to come before this House and the other place and be subject to the affirmative procedure in both Houses.
It has been put to me that the first thing an investor in Royal Mail would do is lobby the Government, Ofcom and Parliament to reduce the minimum requirements of the universal service. Let me be clear to this House: any investor in Royal Mail will know our position on the minimum requirements. They will be fully aware of the strong protections that we have built around them, and they will therefore invest in the full knowledge of these protections. Of course, we cannot stop them lobbying, but I can reassure this House that they will not find it straightforward.
Finally, while I hope I have made clear that this Government have no intention of changing the minimum requirements, I am happy to put on the record again, as the noble Lord, Lord Low, has requested, that that assurance applies for the rest of this Parliament, which is almost four years. However, I should also point out that the European Union directive requires that the universal service must respond to the needs of its users. A five-year legislative ban on any changes could therefore amount to non-compliance with our European Union obligations.
Given the reassurances I have made on the protections for the minimum requirements, I would hope that the noble Lords, Lord Young and Lord Low, will feel able not to press their amendments.
Lord Young of Norwood Green
My Lords, before I respond to what the Minister has said, I reassure the noble Viscount, Lord Eccles, that I do not subscribe to conspiracy theories—
Baroness Wilcox
My Lords, I apologise as I do not think that I have spoken to Amendment 66. I know that I have taken rather a long time to reply to this group of amendments, but it contains some very important points, particularly in relation to the matters raised by the noble Lord, Lord Low.
Amendment 66 is similar to an amendment tabled in Committee, although that was to Clause 35. As with that amendment, I agree wholeheartedly with the intention behind it. However, I am delighted to assure the noble Lord, Lord Young, that it is simply not needed. It is the Government’s intention to ensure that the one-price-goes-anywhere service is protected and that the minimum requirements of the universal service cannot vary across the United Kingdom. We are absolutely clear that the wording of the Bill as it stands—specifically requirement 3 in Clause 30—fulfils that intention. There is no cause for doubt. Furthermore, in Clause 33 we are putting in place new safeguards that explicitly prevent any changes to the minimum requirements that would result in non-uniform pricing, so the one-price-goes-anywhere service is protected now and in the future.
In Committee, the noble Lord, Lord Stevenson, asked about the interplay between uniformity and the requirement in Clause 35 that if a designated universal service condition makes provisions for the tariffs to be used for determining prices for universal services, Ofcom must take into account the costs of providing the service or part of the service. There is no contradiction between this and the need for uniform pricing. It simply means that the uniform price should take account of the total costs. Uniformity is a defining feature of our universal service and the Government are committed to maintaining it as such. I do not think that I can be any clearer than this. The provisions in Clause 30 and Clause 33 already guarantee a one-price-goes-anywhere service. I hope that the noble Lord will, at the appropriate time, not press the amendment.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I shall also speak to Amendments 68 and 72 standing in my name. During our discussions, many of your Lordships, who are leaving the House quietly, have raised concerns about the prospect of other operators cherry picking profitable parts of Royal Mail’s delivery business. We have listened to these concerns and, as indicated in Committee, we have looked again at the Bill to check that there is sufficient protection in place. While we are confident that Ofcom has the necessary tools to ensure fair and effective competition in the market, we have come to the conclusion that there may be occasions when Ofcom will need to build in greater time to inform its use of these tools. These amendments therefore give Ofcom the power to require operators to pre-notify it of a planned commencement or expansion of a letter delivery operation on a specified scale.
This notification mechanism will ensure that Ofcom has the necessary time to evaluate the potential impact on the universal service of such an operation before the operation has commenced and before any potential damage has been done to the universal service. The detail of exactly how Ofcom will calculate what constitutes a significant service will need to be determined, but the policy intention is for only significant letter delivery operations to be caught. As such it will not impose any additional burden on, for example, current access competitors, courier services or parcel delivery businesses.
This is a light-touch, narrowly focused regulatory safeguard that will help Ofcom address an issue that has concerned many of your Lordships. I hope therefore that your Lordships will be able to support Amendments 58, 68 and 72 and I beg to move.
Lord Young of Norwood Green
My Lords, Amendments 58, 68 and 72 constitute a welcome and positive strengthening of regulation of the postal sector. By abolishing the licence system the Bill carries potential dangers of destabilising universal service provision by deregulating the provision of competition. The proposed new clause goes some way to averting this danger and will allow Ofcom, whether directed by the Secretary of State or not, to impose notice of condition on anyone intending to introduce a delivery of letters within the scope of the universal service beyond a specified level, so we welcome this set of amendments.
The objective of Amendment 67B is that in setting prices Ofcom should not exclusively focus on the cost of providing the network, which would satisfy the current requirement under Clause 37(6), but should take account of the true cost incurred by Royal Mail in providing the universal service itself. It is important to be clear—this amendment would not require Ofcom to ensure the cross-subsidy of the universal service from access products. It would ensure that Ofcom considers the true cost of the USO to Royal Mail in setting these prices. I look forward to a brief response from the Minister.
Baroness Wilcox
My Lords, Amendment 67B seeks to ensure that, when imposing prices to access the network of the universal service provider, Ofcom must have regard to the costs associated with meeting the universal service. I agree with the noble Lord on this issue and that is why we have tabled Amendment 61, which is in another group but is entirely relevant to this debate. Amendment 61 will ensure that when carrying out its functions, including when imposing access conditions, Ofcom must have regard to,
“the need for a reasonable commercial rate of return for any universal service provider on any expenditure incurred by it for the purpose of, or in connection with, the provision by it of a universal postal service”.
While I agree with the intention behind Amendment 67B, I hope that I have explained that government Amendment 61 in the next group and the government amendments in this group will fulfil the same objective. Therefore I hope that the noble Lord will consider withdrawing Amendment 67B and support government Amendments 58, 68 and 72.
Baroness Wilcox
My Lords, I beg to move Amendment 59 and in doing so speak to Amendments 61 and 62 in my name.
We must strike the right balance between promoting competition and protecting the universal service, and I thank your Lordships for the many important contributions on this issue. However, the Bill by itself will not secure the future of the universal postal service or Royal Mail. To achieve that, Royal Mail needs to become financially self-sustaining. Therefore there needs to be certainty that, just as has been done in other sectors, Ofcom will have regard to the need for the provision of the universal service to be financially sustainable in establishing the regulatory framework.
Amendment 61 adds flesh to this requirement, specifically that “financially sustainable” should include,
“the need for a reasonable commercial rate of return for any universal service provider on any expenditure incurred by it for the purpose of, or in connection with, the provision by it of a universal postal service”.
The intention of this amendment is to allow the company the opportunity to earn a reasonable return on all expenditure incurred in providing the universal postal service and any regulated access services, in so far as they make use of the universal postal service network. The term “reasonable commercial return” in the amendment is intended to mean simply that in applying this duty Ofcom could, among other things, and when it deems it appropriate, take into account private sector international operators in the postal market, their respective levels of efficiency and the different markets they are operating in, as well as regulated commercial companies in other regulated sectors.
To be clear, it would be for Ofcom to determine exactly what to take into account when considering what constitutes a reasonable commercial return. This requirement is in the context of the need to ensure that provision of the universal service is, and remains, efficient after a reasonable period. Obviously, it is not within the gift of the regulator to determine precisely what returns Royal Mail can make; that should depend on the market and the company’s performance. However, it is essential that the regulatory framework should provide the space and incentives for Royal Mail to be successful, to make the necessary efficiency improvements and to allow for good performance to be rewarded, without regulation eroding the effect of increased efficiency.
The Government believe that, in the long term, the universal service should be both financially sustainable and efficient, and that this will be possible if Royal Mail continues with the good progress it has made in modernising. But of course this takes time. We have therefore tabled two other amendments to Clause 28 to specify that the requirement for efficiency should be,
“before the end of a reasonable period”,
to give Royal Mail time to continue its vital modernisation.
The amendments to Clause 28 constitute a major strengthening of the Bill. They provide even greater security for the universal service. I hope your Lordships will be able to support them.
Lord Young of Norwood Green
My Lords, we welcome government Amendments 59 and 62, which would allow Ofcom to establish the timescale for the universal service provider to achieve the levels of efficiency which it is reasonable to expect. This is a recognition that Royal Mail is going through the difficult process of modernisation. The amendment acknowledges this process, which is entirely welcome. Government Amendment 61, which is also most welcome, recognises the universal service provider is entitled to achieve a reasonable commercial rate of return in the provision of the universal postal service, as indicated by the noble Baroness.
Amendment 60 seeks to prevent unnecessary regulatory intervention in areas of the market where effective competition exists. According to the regulator Postcomm, Royal Mail has complained of considerable overregulation since 2006, with approximately 80 per cent of Royal Mail letters revenue subject to price controls. A range of changes introduced in April this year has reduced this figure by just 5 percentage points. For example, Postcomm had previously proposed to remove regulation from pre-sorted bulk packets and parcels of more than 500 grams, but when Postcomm reached its final decision, it deregulated only for items above 1 kilogram. This was despite Royal Mail evidence suggesting that there was significant competition in the market for items weighing less than 1 kilogram. Preventing overregulation is seemingly a shared aspiration, and therefore I hope that Amendment 60 will find favour. The current regulator is clear that it would rather not regulate where Royal Mail faces competition; our Amendment 60 will make it imperative that Ofcom does not do so.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 7 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Wilcox
My Lords, Amendment 37 seeks to impose consultation requirements on companies or people that propose to close a post office. As we well know, 97 per cent of post offices are privately owned and operated businesses. As I said in Committee, neither Government nor Post Office Ltd can ensure that there is always time to carry out a consultation before an office closes. A sub-postmaster may retire or move away or the premises may be damaged by fire or flooding. It cannot be appropriate to impose a consultation requirement on a retiring sub-postmaster before he can shut his store, as this amendment would do.
My noble friend Lord Jenkin of Roding spoke warmly of the Government’s commitment to ensure that there will be no further programme of post office closures and that the network of at least 11,500 post offices will be maintained. I confirm that commitment. Therefore, if a post office is to close, there is a strong likelihood that this will have been driven by a choice of the sub-postmaster rather than by Post Office Ltd. In the unfortunate event of a post office closure, other than in very exceptional circumstances, Post Office Ltd will seek to maintain services. If a permanent closure without any replacement is proposed, the Post Office must undertake a local public consultation for a six-week period, in line with its code of practice. In addition, Post Office Ltd will contact local councillors and parish councillors about service changes.
It is worth stressing that the code of practice has been agreed with Consumer Focus. I mentioned in Committee that the code of practice has recently been amended to introduce a telephone helpline providing information on temporary breaks in service and on new notification requirements.
The noble Lord, Lord Young, mentioned that at Second Reading and the noble Lord, Lord Dobbs, in his maiden speech, called for a 16-week consultation. He spoke eloquently about the problems faced by rural communities as a result of the previous Government’s closure programmes. However, this Government have committed that there will be no programme of post office closures and a network of at least 11,500 post offices will be maintained. As I said, if a post office is to close, there is a strong likelihood that this will be driven by the choice of a sub-postmaster rather than by Post Office Ltd.
In considering the appropriate duration of local consultations, it is important to strike a balance between giving communities sufficient opportunity to express their views and allowing the Post Office to get on with providing the services on which those communities so rely. A 16-week period—that is four months—as Amendment 37 envisages in some cases, seems to be disproportionately long. That is especially so when we recall that we are talking predominantly about individual small businesses operated by sub-postmasters. Furthermore, the six-week period currently required by the code of practice was introduced, following a national consultation, as part of the previous Government’s closure programme.
I therefore hope that the noble Lord will be reassured by the arrangements already in place and will consent to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her contribution. It goes some way towards providing reassurances and we will reflect on what she said, after carefully reading it in Hansard. In those circumstances, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
I shall briefly support my noble friend Lord Whitty. He has made all the key points about the importance of the additional information that the amendments would provide.
I tend to agree with the points made by the noble Lord, Lord Jenkin, in a previous debate about the potential for locals. They have to get the formula right; they have to get the transition payments right as well. The managing director, Paula Vennells, has assured us that they are learning quite a lot from the 60 or so pilots that are currently running. Interestingly, I received an assurance that they have all been instructed to accept parcels of up to 20 kilograms in weight. Clearly, the message has not filtered through to all of them but the intention is clear. Amendments 40 and 41 pose some important questions and I, too, will be listening intently to the Minister’s response.
Baroness Wilcox
My Lords, I shall speak to the amendments to Clause 11 in the name of the noble Lord, Lord Whitty. I thank him for telling me in advance that he is not going to press them tonight and I hope that my response will at least reassure him.
Amendment 40 seeks to oblige the Post Office to report against its compliance with the access criteria at a UK level and also in each of England, Wales, Scotland and Northern Ireland. The access criteria are national criteria. Five of the six of them apply across the entire United Kingdom but they recognise the country’s diversity by including individual protections for urban, urban deprived, rural and remote rural locations. The sixth criterion—for 95 per cent of the population in each postcode district, such as BA2 or GU27, to be within six miles of a post office—applies to each and every one of the nearly 2,800 postcode districts in the UK. This provides a very real guarantee that post offices will be broadly spread and accessible to communities in every corner of the United Kingdom. I reassure the noble Lord that the annual network report will include details of the Post Office’s compliance with the criteria. Indeed, such reporting is already done. Your Lordships will recall that last year’s Postcomm network report showed that the Post Office continues comfortably to exceed the access criteria.
It is most upsetting to have the opposition Chief Whip sitting here with me. I want that noted.
Lord Young of Norwood Green
My Lords, I shall be brief because my noble friend Lord Lea has covered the waterfront, as they say. He raises a key point, which I referred to in my previous contribution. There are some concerns about the quality of the service offered by locals, but we have had some useful assurances from the managing director, Paula Vennells, about the nature of pilots that will genuinely seek to improve the level of service. The concerns about the quality and range of services have been adequately described by my noble friend Lord Lea.
On the transition arrangements in converting those sub-offices to the local model and what the payments are likely to be, I do not know whether the Minister is in a position to reiterate the statement made by Paula Vennells, who said that broadly speaking the fixed and variable income ought to be more or less on a par with the income at the moment.
I wish to pick up on what my noble friend Lord Lea said when he talked about the importance of government business and it being a key part of the future of these offices; and my final point is that it would be useful if the Minister could confirm that remote rural offices that need a fixed income to survive will not be moved to the local model on a compulsory basis.
Baroness Wilcox
My Lords, Amendments 46 and 49, tabled by the noble Lord, Lord Lea, require the Post Office to provide details in its annual reports of major changes in its sub-postmaster contracts from the introduction of the Post Office Local model. In Committee, I spoke at length about the Post Office Local model, but I would like briefly to reiterate some of the key points. The Post Office Local model was introduced under the name Post Office Essentials in September 2008, and I know that the noble Lord, Lord Young, is therefore familiar with the format. The Post Office Local does away with the impersonal, screened-off, fortress post office counter that requires separate staff. Instead, it provides open-plan access to post office services alongside the retail till for the hours the shop is open. This will involve a significant increase in opening hours for the customer while also providing a much more flexible and lower cost operating model for the retailer. The Post Office Local model currently provides 97 per cent of post office transactions by volume and there are over 50 Post Office Local pilots operating across the country right now. Customer satisfaction with these pilots has been excellent with 94 per cent of customers being very or extremely satisfied with the local model. Some noble Lords will have been unable to hear Paula Vennells, the managing director of the Post Office, speak last week, although I know that the noble Lord, Lord Lea, was there when she spoke. Paula explained very eloquently that it is plainly not in the Post Office’s interest to introduce a model of contract that is not viable for sub-postmasters.
The model will involve pay being rebalanced from fixed to variable pay in those outlets affected. But this cannot be accomplished simply by eliminating fixed pay without evaluating rates of variable pay to ensure the model works for sub-postmasters and Post Office Ltd alike. Over the next two years, there will be continued and widespread piloting to develop understanding of the locations in which a Post Office Local may be viable and the services that may be offered from one.
In 2014, we expect a larger scale rollout so that by 2015 around 2,000 of the network of at least 11,500 will have converted to the local model. To give some perspective over the same period, the Government’s £1.34 billion funding package will enable the Post Office to invest in around 4,000 main post offices in towns and city centres across the country. These will more closely follow the traditional post office model. Of course, that will leave almost 6,000 post offices whose operating model will remain unchanged. I understand that any change in sub-postmaster contracts is of great significance for the many independent businessmen and women who operate post offices up and down the country. But I do not think that a public annual report is the appropriate place for a business to detail its contractual terms with its agents. That is certainly not something that one would see any competitors of the Post Office doing.
I hope that I have provided sufficient explanation and reassurance to the noble Lord to encourage him to withdraw his amendment.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 7 months ago)
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Baroness Wilcox
My Lords, Amendment 2 seeks to keep the Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill, which this House considered in 2009. As I said earlier in response to Amendment 1, the difference between the position of this Government and the previous Government is that we do not believe it is necessary for the Government to retain overall ownership of Royal Mail. Public ownership has not helped Royal Mail to move with the times and to make the changes that it needed to succeed. That is why we need a different approach if we are to safeguard the universal postal service, and that is what we are committed to doing.
The noble Lord, Lord Young, questioned the Government’s mandate for the Bill. The Liberal Democrat manifesto was explicit about the need for private sector investment and employee shares. The coalition agreement was explicit that:
“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.
The Bill does exactly what we said we would do. There are several reasons why we should not seek to retain Royal Mail in public ownership. I covered these at length in Committee but, to summarise: first, the Government cannot provide capital fast enough and any funding we provide has to be cleared by the EU under state aid rules. My noble friend Lord Jenkin of Roding spoke most eloquently from his past experience in support of that. Secondly, limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company.
The noble Lord, Lord Young, asked about the provision to amend the minimum requirements of the USO in Clause 33. Again, I will come to those issues when we discuss his Amendments 65 and 66. I ask the noble Lord to withdraw his amendment.
Lord Young of Norwood Green
My Lords, I listened carefully to what the noble Lord, Lord Jenkin, said. I remember that occasion well, given my interests at the time and the continuing interest which I declared on a previous occasion. As I said, we do not seek to oppose the injection of private capital. Interestingly, there was almost unanimous support for the 2009 Bill, which applied the same formula that I applied to the House today. I hear the points made by the Minister on private sector investment but it is not quite true that it said “100 per cent privatisation” in either the coalition agreement or Liberal Democrat manifesto; I noticed that those were not the words that she used. I stick by my original assertion that this is new territory. It is an important and fundamental decision and one on which we should test the opinion of the House.
Baroness Wilcox
My Lords, Amendments 3 and 13 seek to place additional reporting requirements on the Secretary of State, while Amendment 5 would introduce additional parliamentary procedures before there can be a disposal of shares in a Royal Mail company.
Amendment 3 would require the Secretary of State to report to Parliament how the value will be assessed, and to make available to the Public Accounts Committee of the other place an independent valuation of the business. As we debated in Committee, there are incredible sensitivities about revealing the estimated value of Royal Mail shares prior to a commercial negotiation. We would be giving the whip hand to the potential investor. This does not make commercial sense and would greatly reduce the potential for getting the best value for the taxpayer from any future transaction. The Government will work with their advisers to consider the potential value of Royal Mail so that they can properly assess bids from buyers. Before a sale, the accounting officer for the Department for Business would need to scrutinise any future transaction to ensure that it represented value for money for the taxpayer.
I reiterate what I said in Committee: we would expect that, after a sale had completed, both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer. This is completely in line with the reporting requirements for previous sales of government assets.
Amendment 5 would require that the Secretary of State made an Oral Statement and that an order was laid that was subject to the affirmative resolution procedure before there could be a relevant disposal of shares in a Royal Mail company. As I said in Committee, further parliamentary procedures should not be required before there can be a disposal of shares in Royal Mail. The disposal of shares, as set out in the Bill, has been debated fully in both the other place and this House. The Opposition’s Postal Services Bill of 2009 did not include a requirement for additional parliamentary procedures before there could be a disposal of shares. As they said at the time, such a requirement would cause uncertainty for potential investors. That uncertainty is the same whether we are selling a majority or a minority stake. I said in Committee that I fully agreed that an Oral Statement might be appropriate for the first sale of shares. We will discuss with the House authorities the appropriate format for such reports at the relevant times.
I turn to the last amendment in this group, Amendment 13. The purpose of Clause 2 is to ensure that Parliament has transparency about the way in which shares or share rights in Royal Mail that reduce the proportion owned by the Crown are disposed of. The amendment would require reporting on any subsequent disposal of shares by the original purchaser. I do not consider that such a reporting requirement is appropriate. I know of no precedent for this type of “open-ended” reporting in any previous privatisation. The Companies Act requires that a private company has to disclose a full list of its shareholders on incorporation and then with the first annual return to Companies House following incorporation. It then has to provide such a list every third annual return after a full list has been provided. Information on ownership of Royal Mail will, therefore, continue to be publicly available.
As with discussions we had in Committee on other aspects of the Bill, I see no reason to impose more onerous reporting requirements on a privately owned Royal Mail than those that are currently imposed on privately owned companies. Clause 2 does, of course, continue to apply to any disposals of shares by the Secretary of State himself after the initial sale. The crucial issue, however, is not ownership but securing the future of Royal Mail, and in doing so securing the future of the universal postal service. Regardless of who owns the company, it would still be the universal postal service provider in the United Kingdom. It will still need to comply with any conditions issued by Ofcom in the universal postal service order to be made under Clause 29 of the Bill. The purchaser would, therefore, be fully aware of the obligations that the company it is purchasing must deliver.
The initial conditions in the universal postal service order will follow those currently set out in the licence issued to Royal Mail by Postcomm. Condition 12(5) of that licence requires Royal Mail to notify the regulator if there is any change of control in the company. It will be for Ofcom to decide whether to impose similar conditions in the future as part of delivering its overall duty to secure the future of the universal service. With these reassurances, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I have listened carefully to what the Minister said and I welcome her assurance regarding the Oral Statement. That represents some progress, but we still feel that she has not fully addressed our concerns about the presale valuation and the ability to report to the Public Accounts Committee in confidence. We will reflect on the situation, but in the light of what has been said I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, we welcome the amendment moved by the noble Baroness, Lady Wilcox, and believe that it is a step in the right direction. The question is whether it goes far enough in that direction. We welcome the Government’s acceptance of the kind of information that ought to be made available before Royal Mail is sold. We have already stated that there are still many unanswered questions about the disposal—the timetable, the qualification of the future owner, the nature of the sale, how value for money will be secured, the danger of asset-stripping, safeguards for the universal service, and safeguards for the post office network. Yet the scope that is being given to the Secretary of State to make the sale is still very large indeed, with only a factual report to Parliament.
There is a significant improvement in the scale of information that is being offered, but it is certainly not the whole answer. I listened carefully but I did not quite get the assurance given on the nature of the contract between Royal Mail and the Post Office. I would welcome the Minister, in responding, clarifying the point that she made about next spring, when this contract is likely to be signed, and saying how strong the guarantee is on the 10-year period. Is it still just a hope, and are there still likely to be legal barriers to the 10-year period being a part of the contract?
I want to speak to Amendments 7 and 8. The House will be aware that we have consistently put the case for a long-term agreement between Royal Mail and the Post Office, to run from point of sale. We have proposed a 10-year duration. As my noble friend Lord Whitty said, it is certainly not an academic issue; it is a matter of commercial survival. The Government’s assurances are an improvement but still fall short of the commitment that we seek. I have no doubt that we will continue to return to this issue until we get a satisfactory assurance.
My noble friend Lord Whitty’s amendment provides a useful elaboration of the information that we seek, including the contract length, any contractual break period and the total value of the contract to Post Office Ltd. We urgently support his amendment and urge the House to do so.
Amendment 8 seeks further guarantees, and important ones, on the risk assessment of the proposed disposal of Royal Mail. My noble friend Lord Christopher rightly seeks confirmation that due diligence of the prospective buyer has been undertaken. These are sensible steps to take before such an important transaction, and I thought that his graphic and interesting description of the Netherlands postal system was an important contribution to this debate.
Once again, we support this amendment.
Baroness Wilcox
My Lords, I rise to respond to the noble Lords, Lord Whitty, Lord Christopher and Lord Young, on my amendment and the other two amendments. In response to the concerns expressed by the noble Lord, Lord Whitty, about the details to be provided in the Clause 2 report, I reiterate some of the sentiments I mentioned earlier. The information that we propose to include in the report includes much of the information that the noble Lord seeks in his Amendment 7. I would hope that the contract’s duration would be for the 10 years that many noble Lords are seeking, but the longest legally permissible duration will depend on other factors, such as volume commitments, which must be commercially negotiated between the companies. Finally, we must not require in Clause 2 the disclosure of information that might inadvertently damage the commercial interests of either business. That would damage the commercial sustainability of the post office network, which I am sure is not the noble Lord’s intention.
The noble Lord, Lord Christopher, raised a number of important points about how the postal service is provided in the Netherlands. I believe that these are consequences of the regulatory framework in the Netherlands, not of the ownership of its postal companies, but we will come to those matters when we debate Part 3 of the Bill, and I hope I will be able to provide him with further reassurance then.
The noble Lord, Lord Young, asked me to clarify what I said about the timing of a new contract between Royal Mail and the Post Office. As I said, negotiations are under way, and we expect a new contract to be ready to be signed by next spring. I hope that with those reassurances the noble Lord feels that he can withdraw his amendment.
Lord Young of Norwood Green
My Lords, I also support Amendment 9 in the name of my noble friend Lord Kennedy. It asks that the report should include information about how the name of Royal Mail is to be protected and used by the universal postal service provider. I listened with interest to the noble Lord, Lord Jenkin, when he mentioned the value of the brand. We should remind ourselves that it was not that many years ago that the dreaded Consignia reared its head. Nobody understood why such an appalling name was chosen. It received no public understanding or acclaim, but no doubt the consultancy did quite well out of it. There is a bit of previous in this respect, which is why my noble friend Lord Kennedy was absolutely right to draw this aspect to our attention.
I will deal also with Amendment 54. As others have said, the House will agree that we owe a debt to my noble friends Lord Clarke and Lord Christopher, who deserve enormous credit for persuading the Government to bring forward this amendment, which will require the Post Office to tell us in an annual report how these collections are being looked after. I also pay tribute to the enthusiasm of the noble Lord, Lord Boswell, in his support for this. He made the point about ensuring that the collection is on public display and adequately resourced. While we welcome the amendment, producing a report is not the same as making sure that the heritage is taken care of. However, it will certainly concentrate minds and provide a degree of transparency that was not in the original Bill. Again, I congratulate my noble friends Lord Christopher and Lord Clarke, and the Government for listening to their case, which we welcome.
We also support Amendment 55, which would improve the government amendment by requiring that the report include details of donations, both in money and in kind, from Royal Mail to the British postal museum and the Royal Mail archive. I hope that the Government feel able to take another positive step in this direction by supporting the amendment.
Baroness Wilcox
My Lords, I will respond to the amendment of the noble Lord, Lord Kennedy, and then move on to Amendment 54 and also respond to Amendment 55 at the same time.
I said in Committee that I fully appreciate the sentiment behind the amendment of the noble Lord, Lord Kennedy, and understand why he seeks reassurance that the Royal Mail name will be preserved. However, the name of the company that delivers the universal postal service should be a commercial decision for that company and its shareholders. As the noble Lord, Lord Kennedy, said in Committee, Royal Mail is a great brand name. My noble friends Lord Jenkin of Roding and Lord Boswell have agreed. The commercial reality is that any owner will see this name as an asset. It is instantly recognisable in the United Kingdom in relation to the provision of the universal postal service. As a brand it is up there with Coca-Cola and McDonald’s—brands and goods that your Lordships might not necessarily purchase but will no doubt recognise.
I have heard what has been said about companies doing daft things. I agree that this can happen, but it is very rare for any company completely to abandon its leading brand. For example, there has been much discussion of the decision by the Post Office corporation in 2001 to change its name to Consignia once its operations were transferred to a public limited company. With hindsight, all involved—Parliament and the general public—saw this as a poor decision. However, even in this situation the brand name Royal Mail was not abandoned, nor was Parcelforce or the Post Office. These brand names continued to be used in all customer-facing operations, regardless of the name of the top company. A similar example is Centrica’s continued use of the brand name British Gas. To all intents and purposes, the public-facing side of the business in the United Kingdom is British Gas. This can be seen in its advertisements in newspapers and on television. I have listened carefully to the points raised in the debate today but I am not persuaded that it is necessary to include in primary legislation a requirement for a company to be called a particular name after a privatisation. This would not be good use of the legislative process.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 8 months ago)
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Lord Young of Norwood Green
Amendment 24PA, standing in my name, would ensure the continuation of the current inter-business agreement between Royal Mail and Post Office Ltd. The agreement should be in force before any disposal of an interest in a Royal Mail company and should include the definition of the relationship between that Royal Mail company and Post Office Ltd after the disposal.
Amendment 24P, in the name of the noble Lords, Lord Laird and Lord Rogan, seeks an inter-business agreement of 15 years’ duration, while that in the name of the noble Lord, Lord Bradshaw, seeks one of 10 years’ duration. We share the view that that would be a reasonable period, although Amendment 24PA makes the point at a different clause in the Bill. At this stage, I am sure that if Ministers could accept the principle then we could between us find the best place in the Bill to insert it.
The noble Lord, Lord Skelmersdale, made a point about setting things in tablets of stone. I should have thought that there ought to be the capacity to review some of the detail of an inter-business agreement. The important thing is to establish it.
The Post Office is dependent on Royal Mail's business for a significant part of its survival strategy. More than one-third of its revenue, some £343 million, and one-third of sub-postmasters' pay, £240 million, is generated by selling Royal Mail products and services. If the two businesses are to be forced to separate, our concern is that a privatised Royal Mail might look elsewhere for a better bargain and for other retail outlets to sell its products. There is no guarantee it will use post offices to the same extent. The Bill does not safeguard the inter-business agreement through which Royal Mail guarantees use of the Post Office as its retail arm. When it comes to be renegotiated, a privatised Royal Mail could look to reduce costs by using other outlets such as supermarkets or high-street chains instead of post offices. To date, the Government have not agreed to undertake to extend the current, five-year IBA to 10 years.
Without an extended IBA, there is no guarantee that Royal Mail will continue to use the Post Office. In evidence to the Postal Services Bill Committee, the Minister, Ed Davey, stated:
“No previous Government have thought to put it on any different footing”.
But then no other Government have needed to intervene on the inter-business agreement because no other Government have separated the Post Office from Royal Mail. The Minister tried to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. He further said in evidence to the committee:
“I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement”.
The stated aims of the current management of Royal Mail, while welcome, are insufficient reassurance. The relationship between the two companies is one of imbalance. The Post Office cannot survive without Royal Mail, yet Royal Mail could succeed without the Post Office. Ed Davey went on to argue in his evidence to the committee:
“If you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that it would be subject to serious legal challenge”. —[Official Report, Commons, Postal Services Bill Committee, 11/11/10; cols. 121-23.]
However, he has provided no evidence to support this position. Given the importance of retaining the relationship between the two businesses and the risk of leaving its maintenance to the discretion of Royal Mail, the Government should instead require a 10-year IBA as part of the Bill and ensure that this meets the requirements of EU competition law. To do so could only strengthen the position of the Post Office. As I understand it from a recent discussion with the Post Office, it is indeed seeking to establish a legally binding agreement with Royal Mail.
Consumer Focus has warned of the risk to the Post Office of the lack of a long-term IBA. It has argued that the number of post offices could fall by 37 per cent, from its current level of 11,900 to a minimum number consistent with the Government’s access criteria, 7,500. The National Federation of Sub-Postmasters believes that a minimum 10-year IBA is essential and that, in order to avoid further post office closures, the existing levels of Royal Mail work at post offices must be maintained, with a minimum 10-year IBA between the two companies.
Post offices—predominantly those in rural areas—are still struggling to survive; they are finding it hard. Only 4,000 of the UK’s 11,905 post offices are economically viable and, despite assurances from the Government, which we welcome, that there will be no further programme of post office closures, branches are still closing every week. More than 150 post offices have closed on a long-term temporary basis this year alone, with no absolute guarantee that they will reopen. So there is genuine concern here. The 900 post offices that are currently up for sale, an issued referred to George Thomson, the General-Secretary of the National Federation of Sub-Postmasters, is an unusually high number. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated in sub-post offices and the Post Office is struggling to find alternative premises and service providers.
The post office network can ill afford to lose any more work. That is why it was unfortunate, to put it mildly—it is my attempt at irony—that the Post Office’s contract to award 400,000 green giros a week has recently been lost. This provided 400,000 transactions a week, a significant of level of footfall supporting the network and around £70 million in revenue over five years to Post Office Ltd. It strikes an unfortunate note given the recent statements by the Government that they are determined to ensure that post offices will be the front office for a number of government services. I would welcome the Minister’s comments on that decision.
As I have said, the Government have rejected a number of opportunities to make that commitment firm in this important legislation. They have declined to accept a statutory commitment, as exists in countries such as Germany and the Netherlands, to a figure of 11,500 offices; they have rejected embedding into the Bill the access criteria stating how close your nearest post office will be; and they have even rejected empowering Ofcom to adjust the statutory commitment over time. We do not doubt the Government’s good intentions but it will take more than that to require a privatised Royal Mail to use the post office network to the same extent as now.
European competition law is trailed as a possible obstacle to an inter-business agreement. The Minister for Postal Services told the Public Bill Committee in another place:
“I am unaware of any statutory precedent for requiring particular commercial terms between two independent businesses”.—[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 360.]
However, there is no precedent for separating the Royal Mail from the post office network. The National Federation of Sub-Postmasters has said that there is nowhere in the world where this has happened. It is the role of new legislation to create precedents. It is because of the precedent of totally separating the Post Office from a privatised Royal Mail that we seek to underpin the relationship with the post office network.
We hope that the Government will reconsider this vital business agreement, which will ensure not only an enduring relationship but the future of the Post Office. I am conscious of the time and I shall cut short my contribution. I look forward to the Minister’s response.
Baroness Wilcox
In these amendments, noble Lords express a concern that has been debated at length in the other place and in other fora—namely, that taking Post Office Ltd out of the Royal Mail group of companies will put at risk the commercial relationship between Royal Mail and Post Office Ltd, and therefore the post office network. The amendment also seeks to provide for any situation where the universal service provider may no longer be Royal Mail alone. I share the noble Lords’ laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd but the approach taken in the amendment—legislating for a contract of a certain length—is not the way to achieve our shared objective.
In the evidence given by various stakeholders to the Public Bill Committee in the other place, strong backing was given for the separation of Royal Mail and Post Office Ltd. Let me reassure this House that the separation of Post Office Ltd and Royal Mail will not lead to dangers for the post office network. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners because there will remain an overwhelming commercial imperative for the two businesses to work together.
In her evidence to the Public Committee in the other place, Moya Greene, the chief executive of Royal Mail, called the post office network,
“the best and strongest network in the country, by any yardstick”.
She also said that it would be “unthinkable” for there not always to be a very strong relationship between the Post Office and Royal Mail. To underline this point, Donald Brydon, Royal Mail’s chairman, pledged in his evidence to the same committee that, before any transaction took place, a continued long-term commercial contract will be put in place between the two businesses for the longest duration that is legally permissible. On Report in the other place, the Minister for Postal Affairs pledged to the House that the Government will ensure that this commitment is upheld. I repeat that pledge to your Lordships today.
I also remind your Lordships of my commitment to consider the amendment to Clause 2 proposed by the noble Lord, Lord Whitty. His amendment would have ensured that information regarding the relationship between the two companies is included in the report laid before Parliament when a decision has been taken to dispose of shares in a Royal Mail company. I hope to bring forward a government amendment on Report to address those concerns which I believe will also provide greater comfort to the noble Lords bringing forward these amendments today. However, I would like to explain why I cannot accept these particular amendments.
In these amendments, the noble Lords, Lord Laird and Lord Rogan, seek to place the agreement between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 15 years. The noble Lord, Lord Young, and his colleagues on the Front Bench also specify that the Secretary of State should ensure that an agreement of at least 10 years is in place. As was discussed in the other place, legislation is not the appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. These negotiations are best left to the businesses themselves, which know far better than we in this House their customers, the markets they serve and the services they require of one another. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volume, service levels and duration. Focusing on the duration of the contract would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts—the businesses and their advisers—should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us in Parliament. What the Secretary of State and indeed the Government can and will do is to ensure that there is a contract in place between the two businesses before separation. Most importantly, government can of course help to create the conditions in which both businesses can flourish in partnership with one another. One thing is certain: a struggling Royal Mail will lead to problems for the Post Office. This Bill introduces the ability to bring in much-needed private capital for Royal Mail to invest in its transformation so that it can offer the very best service.
Lord Young of Norwood Green
My Lords, I thank the Minister for her response. I have a couple of comments to make. She talked about a long-term contract that is legally permissible. I would welcome some elaboration on what the Government envisage. We constantly talk about this long-term contract that is legally permissible, but somehow we seem to be short on finding out what is the longest contract that is legally permissible. That creates a feeling of uncertainty. If she does not envisage that this is the appropriate place for that contract, in the legislation, can she make it clear that the Government will ensure that there is a contract in place before separation?
Although we welcome the £1.3 billion funding package, the other concern that I addressed in my contribution, to which she did not respond, was that the funding package is good but that it also requires commitment in business coming from the Government. As I pointed out, in the first test that we saw on this, on the green giro cheques, the Post Office did not get the contract. In our view, and in that of a number of people, that was a significant contract. Before I make up my mind, I would welcome a response on what is legally permissible with a long-term contract, or an explanation of what the Government are doing to get that answer if the noble Baroness does not have it, and on the commitment to ensuring that government business will go to the Post Office.
Baroness Wilcox
We have gone on record in the other place and I have repeated it here today. I have no doubt that the noble Lord will read it but I will write to him to clarify further, as best I may. I understand about the business. In fact, the contract was not that big but the Post Office had to bid for it. We are very encouraging of all government departments to bear in mind the work they may be doing themselves but which the Post Office could do better for them. We are encouraging all departments to look again and think carefully about what work they can start to bring forward that could be better done by the Post Office.
Lord Young of Norwood Green
My Lords, I suspect that everything that needs to be said has been said already and I do not want to fall into the trap of saying “but not by everyone”. There is a common thread relating to heritage. I think that keeping the Queen’s head on stamps would be a reasonable tribute as we come up to her Diamond Jubilee. An amendment on that matter was the only amendment passed in the other place, and I look forward to hearing a confirmation of that. Other noble Lords have eloquently stressed the importance of the archive. When companies are privatised, that poses a real threat to their records, and I witnessed what happened to British Telecom’s archive and heritage. Therefore, I, too, look forward to the Minister’s response.
Baroness Wilcox
My Lords, I very much understand and appreciate the sentiments behind these amendments. Royal Mail has a tremendous history and heritage. I know that the noble Lords, Lord Clarke and Lord Christopher, have both campaigned to secure Royal Mail’s future for many years, and they have a strong desire to protect the company’s proud heritage.
As noble Lords have heard, I recently visited Royal Mail’s archive and saw for myself some of the public records, including a sheet of Penny Black stamps—something that I thought I would never see—and museum artefacts on display in the archive. I also saw on my visit the designs for stamps commissioned by the then Postmaster-General, Tony Benn, working with the artist David Gentleman, which did not include the image of Her Majesty. Thankfully, as I think the Committee will agree, these stamps were never issued and the tradition that the noble Lords are seeking to preserve through Amendments 25A and 25B continues to this day.
Clause 60 provides the Secretary of State with a power of direction that can be used to require the universal service provider to maintain that tradition and to make sure that the stamps receive royal approval before they are issued. Amendment 25A would require the Secretary of State to issue such a direction, while Amendment 25B would require that any such direction was subject to the affirmative resolution procedure.
This clause was discussed in the other place and, as was mentioned by the noble Lord, Lord Young, the Government subsequently introduced an amendment to strengthen the safeguards for protecting the future of this unique tradition. We are not here today to remove that amendment in any way. The current voluntary framework governing the approval of stamp designs has been in place for more than 40 years and it has worked well.
Royal Mail has been, and is currently, doing just what a direction would require it to do. I would therefore like to draw on a piece of timeless wisdom that says, “If it ain’t broke, don’t fix it”. That is not to say that we should not have the tools in place to fix it, if fixing were ever required. That is precisely what this clause provides for. However, this power is a failsafe that should be drawn on only when required. It can easily be drawn on by the Secretary of State if there is ever a justifiable need to do so.
On Amendment 25B, we take the view that if there is ever a need to use the power of direction, the direction itself will not be of a nature to warrant the use of the affirmative resolution procedure. This power of direction can be used only for a limited and focused purpose, in effect to re-impose time-honoured practice and processes. Furthermore the direction will be imposed only on the universal service provider, and Clause 60 allows for any such direction to be varied or revoked by subsequent directions. We believe that this clause as it stands is fit for purpose and proportionate to the important task of protecting the future of the sovereign’s image on UK postage stamps, if such protection is ever needed. I hope that I have been able to reassure the noble Lords on this.
On Amendment 29A, and as noble Lords will recognise, archive status and museum collection status are different, although both are currently maintained by the British Postal Museum and Archive—the BPMA. The archives of Royal Mail and its predecessors are part of the public record, and they will remain part of the public record after we dispose of shares in Royal Mail. The Bill makes this clear and ensures that no changes can be made to the way in which the records are kept without consultation with the Keeper of Public Records, which is the National Archive. As public records, the archive must be preserved, maintained and made available to the public in accordance with the Public Records Act 1958. Amendment 29A would, however, place additional requirements on Royal Mail that would not apply to other organisations which have responsibility for keeping public records. I do not think that it would be right to place an additional burden on a privately owned Royal Mail that Parliament does not place on publicly owned bodies.
The museum collection is not part of the public record; I understand that its ownership was passed to the BPMA in 2004. Although the Government, like noble Lords, wish to see the collection maintained, we do not believe that this should be a statutory requirement on Royal Mail. It is currently not a statutory requirement for Royal Mail to maintain the collection. Royal Mail funds the BPMA because it recognises the importance of its heritage; it does so not because it is publicly owned but because heritage is part of the Royal Mail brand. I would fully expect this approach to continue in the future. Royal Mail, whether privately or publicly owned, should be proud of its history and use it to positive advantage in an open and transparent way.
I read in my brief that British Telecom is a good example of a privatised company respecting and maintaining its heritage, although the noble Lord, Lord Young, has just given us an instance of when it was not. It has a purpose-built repository for the archive which is located in Holborn; and although the dedicated British Telecom Museum closed in 1997, it has invested some £6 million in establishing its Connected Earth initiative which provides access to its museum collection online and at its 10 partner museums located around the United Kingdom, including the National Museum of Scotland, the Museum of London and the Amberley Museum and Heritage Centre.
The noble Lord, Lord Clarke, mentioned the Post Office underground railway—Mail Rail. He was even kind enough to mention it to me the other day in passing so that I would not get caught out, as I would have done if he had mentioned it only today. I understand that the Post Office (London) Railway Act was passed by a Select Committee of this House in 1913. Construction began in 1914 but was halted during the First World War, when the tunnels were used to store and protect art treasures belonging to the National Portrait Gallery and the Tate. The railway finally opened in 1927. At its height it was carrying an estimated 4 million letters a day. Royal Mail decided to stop using Mail Rail for operational reasons in 2003, primarily because many of the mail centres that Mail Rail serviced had been closed or changed their function. Of the nine original stations, Royal Mail still owns only four of the properties.
Royal Mail is not unique in deciding to disuse such underground railways. The German and United States postal service providers have similar systems, but they also no longer carry mail. In fact, the United States railway in Chicago is now used to carry rubbish, as part of the city's waste disposal system. Royal Mail has not made any decisions about the future of the railway; it does, however, continue to maintain the tunnels, to ensure that they remain safe and sound. Although there have been previous discussions about putting the tunnels to commercial use, no commercially viable solution has been developed so far. Any suggestions that your Lordships may have on good commercial uses for the railway can be sent on a postcard to Royal Mail at 100 Victoria Embankment. I am sure that the company would be only too delighted to offer a prize to any offer put forward and successfully processed.
In all seriousness, in response to the noble Lords, Lord Boswell, Lord Brooke of Sutton Mandeville, Lord Christopher and Lord Young, I assure them that I recognise their concerns about Royal Mail, its heritage and how it should best be preserved in future. I would like to take away the issues that they have raised for further consideration and will return to the matter at Report. I ask that, with those reassurances, the noble Lord will be kind enough to withdraw his amendment at this time.
Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
My Lords, I, too, support this legislation. It is safe to say that it is an idea whose time has come. Some would say that it is not before time. As a member of the previous Government, I can say that we had planned a review, but this Government have anticipated that process, and probably rightly so. All the evidence of increased longevity, the contribution to the labour market, productivity and performance that the Minister drew to our attention are valid points.
I have one or two questions and comments. I understand the need to introduce the exception to make the group insurance benefits legal, but I wondered whether someone at some point might attempt to say that there is nevertheless discrimination by not allowing those benefits to include them. Have the Government looked at that aspect?
I must admit that I fell into the group of people who felt that doing away with this would have an impact on youth employment, until I looked at the impact assessment. In some ways I would describe it as counterintuitive, but it is hard to argue with what seems to be an overwhelming weight of evidence. I say only that I still feel that it would be valuable to monitor the situation, but one cannot quarrel with the evidence of the impact assessment.
I have a comment about flexibility. In this country we still have what I call “cliff-edge retirement”: for the most part, you are fully employed and then you are retired. This is something that the noble Lord, Lord Cotter, referred to in passing when he talked about people becoming part-time. There is not a lot of evidence of that. The situation tends to be what I have just described. Once upon a time we in the trade union labour movement thought about the idea of a flexible decade of retirement where we did not fix on a particular age. We ought to be thinking about which legislation would enable employers to be more flexible in employment prior to retirement because of the impact of pensions and so on.
I agree with the points that the Minister made about performance management, appraisal procedures and the need for open dialogue. There has been a lot of talk in the press recently about the number of employment tribunals. If you examine how many times the tribunals succeed, you will find that it is mainly because employers do not operate procedures and do not practise open dialogue. If there were more of that going on instead, that would be good. Looking at things like raising the amount of time relating to unfair dismissal from one year to two will not solve the problem. The Minister is much more on the right lines when she talks about the importance of having the right personnel procedures.
I looked at the reasoning behind introducing the regulations with guidance rather than a code of practice. Again, I understand why the Government have decided that, but I ask that we keep that one under review to see whether in fact guidance is sufficient in these circumstances. Those comments and questions aside, though, I enthusiastically welcome the Government’s approach.
Baroness Wilcox
My Lords, I am grateful to my noble friend Lord Cotter for his words of support and his welcome to all parts of this piece of work. I was particularly pleased to see the satisfaction and pleasure that he is getting out of the period—it can be only one or two years—since he passed the age that we have been referring to. Now that we are working as a coalition, I hope that we will see many more years of work out of him.
The noble Lord, Lord Young, said that his party had anticipated this progress. That is true and we expected him to say that. I am delighted that in broad terms he, too, is welcoming of these words today.
In response to the question on exception for employer-provided insured benefits, we are introducing the insured-benefits exemption in recognition that the default retirement age of 65 is currently used by insurers as a trigger point at which they can legitimately cease to provide insured benefits. The exception will allow them to continue to operate in this way once the default retirement age has gone because otherwise there is a risk that premiums will become too high and employers will cease to provide those benefits. I am sure the noble Lord would agree that is in no one’s interest. The exception will apply initially to employees aged 65 and above and will rise in line with the state pension age. I hope the noble Lord finds that answer helpful.
Monitoring the impact is good advice. We will monitor the impact through available resources such as the Labour Force Survey. We are committed to a review after five years. I enjoyed the noble Lord’s description of cliff-edge retirement. I had not thought of that phrase but it aptly describes what happens when we do not think through how things can work as people go forward in their working life. The Japanese or the Chinese have a system whereby they bring in a younger worker alongside an older worker and gradually the job changes in time and expression as between them they use a mentoring system. I am not sure we are that sophisticated yet.
I am grateful to both noble Lords who participated in the debate. Your Lordships’ House has, as always, displayed a keen interest in the default retirement age since its inception under the previous Administration in 2006. The Government are moving swiftly and decisively to fulfil the commitment to abolish it while providing new guidance and transitional arrangements to help businesses adjust. We are giving greater freedom to older people who want to remain economically active to contribute to the UK’s future growth. I commend the regulations to the Committee.
Patents County Court (Financial Limits) Order 2011
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
My Lords, we, too, welcome the proposed legislation. I reflected as the noble Baroness moved the legislation that—if I may paraphrase—justice overpriced is justice denied. The report of Lord Justice Jackson provides welcome assistance to SMEs by reducing the cost of protecting patents and designs in disputes and by allowing claims of up to £500,000, excluding interest, to be heard in patent courts.
It is a pity that we will need further secondary legislation to include IP rights such as copyrights and trademarks. It is a shame that this could not be done in parallel legislation. Perhaps that would not have been possible, but I would welcome an explanation of why there has been a delay and why we could not do both at the same time, given the importance of these areas. I, too, welcome the Minister’s comments on intellectual property insurances. Again, if that helps SMEs and entrepreneurs, it will be valuable.
I have a concern about the post-implementation review. Three years is a long time. Perhaps some consideration could be given to shortening that period. After two years a fair body of evidence should be available. Again, I do not know how practical that is. I concur with the noble Lord, Lord Cotter, on the importance of communicating these important changes to SMEs. With those comments and questions, I, too, welcome the proposed legislation.
Baroness Wilcox
My Lords I am grateful to all noble Lords who have taken part in our discussions today. My noble friend Lord Cotter welcomed a review after three years and felt that further measures might be required, which he would support at the time if he thought that they were right. My noble friend Lord Cotter and the noble Lord, Lord Young, asked how we would communicate with people and whether we would use means other than the internet. E-mail will reach all SMEs. The e-mail notification system includes a large number of representative bodies—we knew that. We will also hold seminars in which Judge Arnold will cover the changes to practices. This is news to me; I thank noble Lords for asking the question because I now know the answer.
As a past chairman of the National Consumer Council, I am very keen to make sure that people get the information that they want in the way they want it. If there is any question that we need to communicate in another way, we will certainly look at it.
The noble Lord, Lord Young, asked why we do not have parallel legislation on copyright and trademarks. Lord Justice Jackson included recommendations to reduce the cost of intellectual property litigation in his review of civil litigation costs. His recommendations included implementing the package of proposals made by the Intellectual Property Court users’ committee. These were intended to reform the Patents County Court. We were able to expedite the completion of stage one of this process through amendments to the civil procedure rules. These introduced simpler procedures and fixed the scale of recoverable costs. Stage two of the package could only be achieved through the lengthier process of this Privy Council order and this will introduce a damage limit of £500,000, which will ensure that lower-value complex cases are automatically heard in the cheaper patents county courts and not the High Court. I hope that that is some form of clarification. If it is not, we will certainly write to make sure that I have expressed it clearly.
The noble Lords, Lord Young and Lord Cotter, asked about waiting for the three-year review. The Intellectual Property Office is working regularly with the judiciary to see how these changes will progress. I do not know whether that answers the question on the second and third years.
I am very glad that we are all agreed that this is a good package of measures. Not only is the introduction of the damages limit a positive move to reduce the uncertainty of civil litigation for smaller businesses, but the collective packages of changes being undertaken satisfies several of the recommendations made by Lord Justice Jackson and his independent review of civil litigation costs. We need to help small businesses protect and profit from their innovation and creativity. By allowing this measure to complement the wider package being developed, we will be providing small businesses with clarity, with certainty and with confidence. I commend the order to the Committee.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
I shall also speak to Amendments 24C and 24D. All the amendments are an attempt to strengthen Clause 11, which relates to an annual report on the postal network being produced.
Clause 11 requires the Secretary of State to lay a report before Parliament and to give copies to Scottish Ministers, Welsh Ministers and the offices of the First Minister and Deputy First Minister in Northern Ireland. Amendment 24A requires the report to contain information on locations where Post Office services are not being provided at the time of the report but which are identified in the post office plan as outlet locations. This form of reporting would be an important development; it would enable stakeholders to distinguish between the Post Office’s intended network and that which they are actually able to achieve.
A major concern has been the number of sub-postmasters leaving the business, as they are unable to make a sufficient living from their post offices. We have heard that more than 900 post offices, which is believed to be an unusually high number, are up for sale. Likewise, we know that more than 160 post offices closed on a long-term temporary basis in 2010. Many more will have closed on a short-term basis. It is important that these changes in the network are clearly reported and that an accurate picture of service levels around the country is reported.
Amendment 24C requires the report to include the number and locations where Post Office services have ceased to be delivered since the last report and the reasons for this service reduction. As things currently stand, post offices close and services are reduced without explanation or justification to the public. Closures as part of a national closure programme went through a form of public consultation, which allowed for some degree of accountability and understanding of the criteria for closure. However, when individual post offices close, no such indication is given.
Not only are post offices continuing to close but the Post Office is preparing to undergo another significant round of change through its new model for the network. Under current proposals, 4,000 main offices will be identified that will continue to provide the full range of services, and 2,000 sub-post offices will be transformed into what is known as “local” or “essential” post offices. These will provide a reduced service; the remainder of the post office network is expected eventually to be developed along this “essentials” model. I would welcome a clarification of that aspect.
It is important that the impact of these changes is properly monitored. The amendment seeks not to change the Post Office’s plans but to ensure that a clear understanding of the shape of the network is achieved. While these changes are not closures, they constitute a major change in service provision. Likewise, the introduction of outreach services as replacements for post offices—often in the form of a van servicing a community a number of set times a week—constitutes a significant reduction in service levels in most areas. It is important that we monitor these changes. At the time of the network change programme between 2007 and 2009, it was envisaged that 500 post offices would be replaced by outreach services. There are now 772 outreach services, which make up 6 per cent of the network.
It is on these grounds—the importance of understanding what is happening to the post office network during closure programmes and understanding programmes where the models are changing—that we seek to strengthen the terms of this Bill. I trust that the House will support the amendment.
Baroness Wilcox
I ask for clarification so that I do not answer a question that has not actually been asked. Is the noble Lord, Lord Young, speaking to Amendment 24EZA as well?
Baroness Wilcox
My ball, I think. An annual report on the post office network laid before Parliament is an important means of achieving transparency around the post office network. The statutory requirement in Clause 11 to lay such a report before Parliament already goes further than the current requirement in the Postal Services Act 2000, which requires only information about the number and location of post offices and their accessibility. This Government have made a commitment that there will be no further programme of post office closures. We are committed to creating a sustainable future for the Post Office, and Post Office Ltd is legally obliged to maintain a network of at least 11,500 branches over the spending period and to ensure that they uphold the access criteria. These commitments should mean that noble Lords have far less reason to worry about post office closures than in previous years. While we agree that there should be an annual report on the post office network, an annual report on its own is only an annual report.
Other means of monitoring the post office network are already in place and have already been put before Parliament. For example, a comprehensive list of all post offices in the country, which is broken down by parliamentary constituency, is placed in parliamentary Libraries each summer. Equally, Schedule 12 ensures that Post Office Ltd’s annual accounts must also be laid before each House of Parliament on an annual basis.
My department monitors Post Office Ltd’s compliance with the access criteria on a monthly basis, and Post Office Ltd also publishes details of the monthly changes in the network currently subject to local consultation on its website. On a quarterly basis, the Post Office sends reports on the number of post offices and their geographical distribution to the parliamentary Libraries. Data is also provided to Consumer Focus on a quarterly basis to enable it to scrutinise the results independently. All these measures ensure that the information that Parliament receives on the post office network is as thorough and as up to date as possible. Finally, should the Secretary of State feel that it is necessary to obtain further information from Post Office Ltd, Clause 11(4) allows this to happen.
This provision ensures that the Post Office’s report must include such other information as the Secretary of State requires. I believe that this obviates the need for any separate report from the Secretary of State as would be required under Amendment 24EZA. A further report would be an unnecessary duplication. For all those reasons, I believe that including in the Bill the various requirements set out in Amendments 24A, 24C and 24D would simply add unnecessary bureaucracy.
The Post Office plays a vital social role in communities up and down the country and the reporting procedures in the Bill reflect that, but we should not forget that these are requirements not faced by any of the Post Office’s competitors. There is an importance balance to be struck here, as the greater the reporting requirements imposed on the Post Office, the greater the cost and therefore impact on the Post Office’s competitiveness. I hope that, with those reassurances, the noble Lord will withdraw his amendment.
Lord Young of Norwood Green
I thank the Minister for her detailed response, which I will study carefully. In the light of the comments made, I beg leave to withdraw the amendment.
Lord Skelmersdale
I am rather surprised that the noble Lord did not seek to group this amendment with the amendments that have just been discussed because, to a great extent, he is covering the same point, although I noticed that he brought the inter-business agreement into his comments towards the end. On that basis, I rather hope that the Minister will to a great extent repeat the answer that she gave to the last group of amendments and in particular her reference to Clause 11(4), which gives the Secretary of State the power to ask the reporters preparing the Post Office report to produce information on any subject relating to the post office network that he believes is necessary at a particular time. This is likely to vary from year to year. I therefore do not think that it is particularly suitable to put this in primary legislation.
Baroness Wilcox
I thank the noble Lord, Lord Young, for moving the amendment and my noble friend for pointing out that it is very similar to the amendments that I spoke to just now. I will see if I can again convince the noble Lord that my response will be a good answer for him to take away and think about.
As we have discussed, the annual report is an important means of achieving transparency around the Post Office network. It is, of course, also right that an annual report on the Post Office network should give details of the postal services that the Post Office provides. That is why we have included this requirement specifically in Clause 11(2)(b). This section requires the annual report to contain details of,
“the postal services … that are provided at … post offices”.
We would expect this to include any postal services that the Post Office provides on behalf of the universal service provider. The income that the Post Office receives from mail and the services that it provides for Royal Mail are, of course, vital and sub-postmasters highly value the footfall generated by mails customers. Indeed, Royal Mail and the Post Office are natural partners and we envisage their relationship continuing for years to come. There is an overwhelming commercial imperative for the two businesses to work together. Indeed, the chief executive of Royal Mail, Moya Greene, commented on the strength of the network and said that it would be “unthinkable” that there would not always be a strong relationship between Royal Mail and the Post Office.
However, we know that the projected decline in letter volumes means that postal services will not be a growth area for the Post Office, despite potential opportunities in parcels. That is why the Post Office is developing new revenue streams, as detailed in our policy statement. We should all be clear that the majority of the Post Office’s income already comes from other sources, in particular financial services, government services and telephony.
The latest Postcomm report on the network of post offices in the UK contains a breakdown of the percentage of Post Office Ltd’s revenue derived from mails, including postal services, as well as financial services, government services and telephony. This information is shown on an annual basis from 2003-04, which allows you to see the change not only since the preceding year but over several years. This information, currently included in the Postcomm report, is exactly the type of information that we would wish to be included when the responsibility for the report transfers to a Post Office company. However, I understand that the continuing relationship between the Post Office and Royal Mail is an important issue for noble Lords and, as such, I would be happy to take this suggestion away to consider. For the time being, therefore, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her reply and her willingness to take the issue away. This is clearly a charm offensive—she supplies the charm and I will endeavour not to be offensive! In light of her comments, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
I suspect that the noble Lord is right. I shall need to check it, but I tend to agree with him at the moment. However, I do not want to delay the Committee.
Baroness Wilcox
My Lords, I agree with the aim of the noble Lord, Lord Young, that the annual report on the post office network should provide information about the accessibility of the company’s post offices to small and medium-sized businesses. I do not know that I can answer the question put by my noble friend Lord Skelmersdale; I surely will, but not immediately.
Baroness Wilcox
Yes.
We know that businesses value the post office network. According to research by the Federation of Small Businesses, almost 20 per cent of small businesses visit the post office every day and nearly half visit twice a week. So I share the concern and I agree with the intention of the amendment. But, as was pointed out by my colleague the Minister for Postal Affairs in the other place, Clause 11 already encompasses what I think noble Lords want it to cover.
First, we should be clear that there is no universally recognised definition of what constitutes a small or medium-sized business. In the United States, the term “small businesses” generally refers to businesses with fewer than 100 employees, while “medium businesses” refers to those with fewer than 500 employees. In the United Kingdom, SME statistics define a small business as one with 10 to 49 employees and a medium business as one with 50 to 250. If we are going to be very technical here, and one can often be very technical when it comes to legislation, it could even be argued that since the UK SME statistics define a “small business” as a business with between 10 and 49 employees and a “micro business” as one with between one and nine employees, both micro businesses and sole traders could be excluded from the definition in Clause 11(3), but that is not the Government’s intention. After all, 95 per cent of SMEs have fewer than 10 employees and we know that post offices play a particularly valuable role for this group.
We therefore intend the term “small business” here to include all businesses with fewer than 250 employees in line with the broader UK statistical definition of an SME. I am quite happy to make that commitment to your Lordships, and of course if the Secretary of State was not satisfied that the Post Office was providing broad enough information to meet this requirement, he could direct the Post Office under the powers of Clause 11(4) to provide any additional information he felt necessary. I do hope that this clarification will reassure the noble Lords, and I would ask the noble Lord, Lord Young, to withdraw his amendment.
Lord Young of Norwood Green
I thank the Minister for that. Was it edification, clarification or education? I will study carefully the comments that she has made and in the circumstances I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, while the main focus of the Bill is to sell off Royal Mail, the plans for the Post Office in terms of separation, mutualisation and reorganisation over the next four years to get it into a position to be mutualised are significant for postal services and people throughout the UK.
Separation and mutualisation are provided for in the Bill, as has been discussed. While there is markedly little detail provided on how mutualisation is to take place or the form of mutual the Post Office may become, the transformation of the network—this is just as significant as the closure programmes which have been seen in recent years—to prepare for this is not covered at all in the Bill. There are no safeguards or parliamentary scrutiny of the proposals which will fundamentally alter the post office network, and it is unclear how Post Office Ltd plans to proceed. Furthermore, Consumer Focus, which has previously monitored closure programmes, is now to be abolished and it is highly uncertain that Citizens Advice, which is to take over its responsibilities, will have the expertise or resources properly to monitor the wide range of changes being planned for the Post Office.
Alongside this, the Bill also means that annual reports on the post office network will be compiled no longer by Postcomm, or Ofcom under the new regulatory regime, but by Post Office Ltd. It is not clear what impact this will have on the extent or quality of information produced. It should also be noted—other amendments deal with this point—that there is no requirement for this annual report actually to be published. In light of these changes, there is clearly cause for concern that the transformation will take place under the radar and without proper scrutiny. Yet it is clear that a fundamental programme of change is planned.
In the Department for Business, Innovation and Skills paper Securing the Post Office Network in the Digital Age, published in November last year, the Government outlined that, in the spring, Co-operatives UK would be tasked with reporting on the options for mutualisation, covering who the members of the mutual should be and their relationship to it. The paper comments on the transformation of the network. The reduction in the number of main post offices gives the greatest cause for concern, with about 2,000 sub-post offices being converted to the local model. That latter commitment worries us. The local model is also referred to as Post Office essentials. As we have said, “essentials” is used because it offers a slimmed down provision of services. These are likely to be offered on the counter of other shops, not through dedicated post offices.
For those reasons, we support the amendment. I will listen with interest to the Minister’s response.
Baroness Wilcox
My Lords, this is the final and possibly the most emotional and serious amendment that I have spoken to tonight, because I too come from a small village—St Mawes in Cornwall. We too have a post office, and local people are worried. The fact that the Bill is called the Postal Services Bill is, in a way, distracting, because it is very good news for post offices. The very good news is that, unlike in the past few years, during which there have been post office closures all over the country, this Government have made an absolute commitment that there will be no programme of closures for post offices, that 11,500 post offices will stay open and that £1.34 billion of investment will be made in them. We should say that loud and clear. Royal Mail is one thing, but the post offices around our country are completely different.
The amendment seeks to restrict Post Office Ltd’s ability to make changes to post office branches. It is an attempt to protect sub-postmasters or sub-postmistresses from having change imposed upon them by Post Office Ltd—the parent company that contracts with sub-postmasters. In particular, the amendment reflects concerns held by some noble Lords regarding the post office local model. The noble and gallant Lord who originally tabled the amendment has been to see me and my team at least three times to obtain clarification and understand what is actually going on here. That is what this is about. In order to ensure that I address these concerns and communicate the position fully, I apologise to your Lordships in advance for the length of my answer at this late hour.
For those noble Lords who are not familiar with this local model, let me explain. It is a new sub-post office model which Post Office Ltd has been testing over the past two years in more than 50 locations across the country. The model involves the establishment, at little cost, of a post office counter in an existing and viable outlet. It differs from what we might consider to be a typical sub-post office, because it does away with the impersonal, screened-off—in our case—“fortress” counter at the back of the post office, which requires separate staff and always has a long queue. Instead, it provides open-plan access to post office services alongside the retail till. That will mean that instead of staff having to close the shop for the few hours that the post office opens, the model that we are considering means that the hours when the shop is open are those during which you will be able to use the post office counter.
These changes provide a much more flexible lower-cost operating model for the retailer. The cost of setting up the office is limited to the inclusion of a new counter that is not required to be manned by separate staff. We envisage that this model is particularly suitable for the many smaller post offices across the country where sub-postmasters are struggling to make a living. We do not deny that this process will involve changes, but moving to more flexible models that focus on the customer is the only way to enable the post office network to thrive across the country.
Noble Lords on the opposite Benches may remember that this model was in fact first piloted under the previous Government in September 2008 under the name Post Office essentials. This amendment seeks to hamper the introduction of post office locals by placing an obligation on Post Office Ltd to consult employees, sub-postmasters, sub-postmistresses and consumer groups, and then report to the Secretary of State before any changes, including relatively minor ones, are made to private businesses. The amendment would result in Post Office Ltd having to consult and report before changes were made to increase opening hours, take on new services, or even change a post office till—let alone change the model. The amendment would also limit the Post Office’s ability to react quickly to developments in its highly competitive markets, and would subject even minor decision-making to government scrutiny.
We cannot just shut our eyes and hope for the best when it comes to the Post Office network. Instead, we must and will enable the Post Office to compete so that it can put its customers first and do well. Additional bureaucracy will damage our shared objective of ensuring that the network is maintained at its current size.
The local model is right for consumers and for sub-postmasters and sub-postmistresses. Customer satisfaction with the Post Office local pilots has been excellent.
Lord Young of Norwood Green
I hesitate to intervene at this late hour, but there is an area that I would like the Minister to address. She said that this was right for sub-postmasters, but is there not a price to be paid? At the moment, they have a guaranteed income. Changing to the local model would mean that they would work on a commission-only basis. That is a significant factor, which is why a great deal of concern has been expressed by sub-postmasters. Because of the lateness of the hour, I will not go into the argument about the quality and types of service. With due respect to the Minister, who always addresses things fairly, she gave the worst-case scenario for a sub-post office. I would welcome some acknowledgement of the change in income stream for sub-post offices, and of the fact that we are talking about a commission-only basis for the essential/local model.
Baroness Wilcox
I will come to that. We are talking about a pilot scheme over a fairly long period, during which we will all learn.
Some noble Lords may be concerned that the model will not create real post offices or offer enough services. However, the model is not designed to replicate a main post office, or a Crown post office, where the entire suite of Post Office products is available. Just as a local or express supermarket offers only the essentials that you use on a day-to-day basis, so a local post office will offer a range of services that one frequently needs.
The local model that is being tested through pilot branches offers the vast majority of existing post office services, and 97 per cent of transactions by volume. One can post letters, pick up one’s pension and deposit and withdraw cash. Post Office Ltd is studying the results of the pilots to see how the model can be improved further and to determine on the locations where it will be most viable before it is introduced more widely. The noble Lord, Lord Rowe-Beddoe, expressed concern that changes in future would not be appropriately thought through. I reassure him that piloting will continue for the next two years, with the major rollout not starting until 2014. We expect that by 2015 around 2,000 out of the network of around 11,500 branches will have converted to the Post Office local model. This change will not be rushed through, but I believe that it is the best way of securing the future of the network.
I recently visited a Post Office local pilot and was very impressed. Mr and Mrs Patel in Dagenham told me that, although the inclusion of a post office counter in their convenience store had taken a bit of getting used to, they were now delighted with it. As a result of the post office services they now offer, they receive an extra 30 to 50 customers a day, who often purchase other items from their shop. Mr and Mrs Patel pointed out that one of the best features of the local model is that the opening hours are vastly extended compared with a typical post office. Their post office is open seven days a week, for 10.5 hours a day, except on Sundays, when it is open for three and a half hours. Many customers come in on their way to or from work, when a typical sub-post office would not be open. In all that time, the increased footfall boosts the sales of the other items they offer.
It is envisaged that the local model will play an important role primarily in urban areas. However, there is nothing to prevent a local model being established in an existing and viable rural retail outlet, should Post Office Ltd decide that this is the best way of serving its customers. Remote rural areas will continue to be served by traditional post offices or by outreach services, which will ensure that communities will still be able to access post office products and services where a traditional post office is not viable.
I hope that noble Lords will understand this Government's commitment to a vibrant future for the Post Office network, and will appreciate that subjecting to consultation even the most minor decisions that the Post Office has to make will simply prevent post offices from being free to operate on a competitive and commercial basis. I fear that the added bureaucracy of consultation and reporting obligations may achieve little except to distract Post Office Ltd and the sub-postmasters and sub-mistresses from the work that they need to do.
I therefore thank the noble and gallant Lord, Lord Bramall, and now the noble Lord, Lord Lea, for tabling and moving the amendment and giving me the opportunity to try to assuage some of the concerns around Post Office local. I ask the noble Lord, Lord Lea, to reflect on what I have said today and withdraw the amendment.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
My Lords, I shall also speak to Amendment 21E. By nature these are somewhat technical probing amendments to see whether there is a loophole in the disposal of “any part”. That is the basis of those amendments. I am trying to set the world record for brevity in moving an amendment. I look forward to the Minister’s reply.
Baroness Wilcox
My Lords, Amendments 21D and 21E refer to the circumstances in which a relevant mutual could dispose of its interest in the Post Office. I understand that these are probing amendments.
Clause 4(4) makes clear that the only people who can own an interest in the Post Office are relevant mutuals, the Secretary of State, the Treasury, a nominee of either the Secretary of State or the Treasury or a company that is wholly owned by the Crown. The clarification envisaged by Amendment 21D is not required to achieve this.
Amendment 21E seeks to ensure that any disposal made by a relevant mutual would be a disposal of its entire interest in the Post Office. While in practice we would expect only one relevant mutual to own the Post Office at any one time, we believe this amendment to be unnecessarily restrictive. For example, there may be circumstances in which different stakeholder groups form separate corporate bodies, each taking an interest in the Post Office. Provided the Secretary of State was satisfied that each body met the conditions set by Clause 7, it would seem overly restrictive to rule out the possibility.
We will debate Clause 7 shortly, but I shall briefly summarise the strict safeguards that are put in place under it. The Secretary of State must be satisfied that the conditions in Clause 7(2) to 7(4) will continue to be met before there can be any transfer to a Post Office mutual. Those conditions ensure that the Post Office mutual must continue to act for the public benefit by promoting the use by the public of Post Office services, that its members have a clear interest in it so doing, and that disposals that might jeopardise that will be prevented.
I hope that I have sufficiently reassured the noble Lord, and I ask him to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I thank the Minister for her reply. I will certainly reflect on those measured words. In those circumstances, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, as all noble Lords will be aware, post offices continue to provide a lifeline to residents in rural and urban deprived areas not only through access to postal services, but also as the shopfront for government services, as a means of benefit collection, and often as the only source of cash withdrawal in an area.
Amendment 22B aims to ensure that proper consultation procedures are followed when a post office closure is considered. It is not intended to prevent all post office closures; it simply aims to strengthen the opportunity for stakeholders to have input into the consultation process. It also provides for a longer consultation process for potential closures in rural and urban deprived areas. Rural and urban deprived areas clearly suffer disproportionately when a post office closes. Post offices have closed in vast numbers in recent years, both through formal closure programmes and through natural wastage when sub-postmasters close their businesses and post offices are not replaced.
Over the past 10 years, the post office network has declined from 17,845 in 2000-01 to 11,905 in 2009-10. This is, in large part, due to two major closure programmes, the Urban Network Reinvention programme from 2003 to 2005 and the Network Change programme from 2007 to 2009. Between them, these programmes resulted in the closure of 4,854 post offices. That means that more than 1,000 post offices have closed outside of those programmes as sub-postmasters leave, often because their post offices have ceased to be viable, and the Post Office is unable or unwilling to provide a replacement.
Approximately 11 per cent of the post office network is in urban-deprived areas. As Consumer Focus clearly states:
“Urban offices play an even more important role in urban deprived areas, particularly as they provide free access to cash, plus pensions and benefit payments”.
The 2003-04 Urban Network Reinvention programme was an attempt by Post Office Ltd to reduce the size of the network with a view to developing a more commercially viable network. It further hoped to manage the so far unplanned decline in network size that was arising from sub-postmasters' decisions to close their businesses. At the time of the programme, there were serious concerns over the fate of post offices in urban deprived areas. The Government stated that they would not close post offices in urban deprived areas unless there was another branch within half a mile or unless there were exceptional circumstances to justify the closure.
The Post Office was heavily criticised at the time due to its lack of adequate consultation. As the then Trade and Industry Committee concluded in its report on the programme:
“Post Office Ltd and Postwatch paid insufficient attention to the need to ensure that adequate consultation procedures were in place before the network reinvention programme began. Although improvements have subsequently been made, and while we understand that sub-postmasters could appreciate a speedy conclusion to consultations over the future of their branches, we think that it is vital that all stakeholders should be given the time and opportunity to present their views on closure proposals. A twelve week consultation period would have satisfied this requirement. It was inconsistent of the Government to allow a company of which it is the sole shareholder to ignore guidelines for consultation which it encourages other organisations to follow”.
Equally, the 2007-09 Network Change programme was an attempt to reduce the size of the network with a view to making it economically viable. Over an 18-month period, more than 2,500 post offices were closed and a further 500 were replaced by outreach services. Outreach services provide postal services to communities where a post office is not deemed to be viable. These are often in the form of a mobile post office, a van which visits communities at certain designated times each week and provides a core range of post office services. There are now 772 outreach services in the UK, making up 6 per cent of the post office network.
The Network Change programme was also heavily criticised due to the difficulty stakeholders had in influencing closure decisions. Research into the programme by Consumer Focus found that,
“consumers were not convinced by the UK Government’s reasons for the closure programme. Furthermore, they were very unhappy with the nature of area consultations on closures, as there was little scope to alter decisions and Post Office Ltd had not been seen to respond to concerns raised”.
The Post Office's code of practice for the Network Change programme closure consultations included a six-week consultation process. Many stakeholders felt that the consultation processes were inadequate. This was, in large part, because the criteria for closures and the decision to close 2,500 post offices had already been made prior to the consultation process. This meant that opportunities for preventing individual closures were very limited.
Post offices are still closing every week. More than 150 post offices closed on a long-term temporary basis in 2010 alone. There is no guarantee that they will reopen and many are likely to stay closed indefinitely. As Consumer Focus has said:
“Since the last programme of post office closures finished we have continued to see a dwindling in the overall number of branches”.
According to the National Federation of Sub-Postmasters, 900 post offices, an unusually high number, are currently up for sale. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated in sub-post offices and the Post Office is struggling to find alternative premises and service providers.
It is vital that adequate protections are in place to protect rural and urban deprived communities from these closures. I urge support for Amendment 22B which ensures consultation ahead of any post office closure, planned or unplanned, and provides additional protection to rural and urban deprived post offices. I beg to move.
Baroness Wilcox
My Lords, I thank the noble Lord, Lord Young, for his Amendment 22B. An annual report on the Post Office network laid before Parliament is an important means of achieving transparency around the Post Office network. The statutory requirement in Clause 11 to lay such a report before Parliament already goes further than the current requirement in the Postal Services Act 2000, which requires only information about the number and location of post offices and their accessibility. Neither Government nor Post Office Ltd can ensure that no post offices close during the reporting period, nor can they ensure that there is always time to carry out a consultation before an office closes. For example, a sub-postmaster or sub-postmistress may retire or move away, or the premises may be damaged by fire or flooding. After all, 97 per cent of post offices are privately owned and privately operated businesses.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 9 months ago)
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, Amendment 13 seeks to place a duty on the Secretary of State to ensure that employees’ existing rights of recognition are maintained. I am not sure whether the amendment fits neatly into Clause 2, which is intended to place a duty on the Secretary of State to report to Parliament when a decision has been made to undertake a disposal of shares in the Royal Mail company. However, I am happy to debate the specific issue raised by the noble Lords.
Before I do that, I reiterate that the Government welcome the positive changes in the relationship between Royal Mail’s management and the CWU over the past 12 months. I say this because, notwithstanding the historic references made by the noble Lord, Lord Young, industrial relationships at Royal Mail have undoubtedly been poor in recent times. The national strikes in 2007 and 2009 were damaging for the company and for the postal market but the business transformation agreement, reached in March last year, has seen the implementation of a new approach to union-management relationships. It has enabled progress on the much needed modernisation of the company and I urge both sides to continue to work together in that improved way.
The noble Baroness, Lady Donaghy, was concerned about uncertainty for employees. Let me be clear that the worst thing for employees would be for us to do nothing and to let the Royal Mail decline through inaction and a lack of investment. People want to work for a stable company and to have a secure pension, and I believe that our proposals will help us on both those fronts.
On employee representation, employees at Royal Mail are mainly represented by the Communication Workers Union and by the Communication and Managers’ Association, which is a section of UNITE. This representation is recognised in voluntary agreements between these unions and the management. The Government do not play a role in these agreements. Such voluntary agreements occur across industries where there is a union presence and it is good practice for the employer to take full account of the views of employees when deciding whether a union should be recognised or continue to be recognised. Union membership remains relatively high within most grades at Royal Mail. That fact suggests that most staff support union recognition.
I have no reason to believe that any new owners would seek to change such agreements, provided, of course, that the employees wish to continue to be represented by those unions. Any new owner will fully appreciate the need to work with employees’ representatives to secure the future of the company in the changing postal market. Management most certainly cannot do this alone. However, as I have said, union recognition within Royal Mail—or any other business—is primarily a matter for the employer and the trade unions concerned. I do not therefore believe that it would be appropriate for there to be a specific duty on the Secretary of State to guarantee these arrangements in Royal Mail. I therefore hope that the noble Lords, Lord Young and Lord Lea, will take time to consider my response and that they will withdraw their amendment at this time.
Lord Young of Norwood Green
I thank the Minister for her response, even if it did not go as far as I would have liked. I also thank my noble friend Lady Donaghy for contributing to this debate and for pointing out that at a time of great change—and moving to a privatised environment will be a great change—the role of unions will be absolutely vital. My noble friend Lord Lea warned about not taking trade unions for granted in the current environment.
While the Minister welcomed the new approach between management and unions and laid stress on the question of voluntary agreements, any new owner ought nevertheless to recognise the environment that they will be coming into. If they want the company to succeed, it will mean working with the unions, in our view. We will reflect on what has been said and consider whether we need to bring this back on Report. On that basis, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, somewhat later than planned, I rise to support both Amendment 16 in the name of the noble Lord, Lord Low, and Amendment 16A in the name of my noble friend Lord Touhig.
We can be proud that the universal service includes the six day a week, price goes anywhere letter service, but there are other important elements to it. Following representations from the noble Lord, Lord Low, in particular, the previous Government agreed to incorporate into the universal service minimum requirements the service to blind and partially-sighted customers and to put it into their 2009 Bill.
I pay tribute to the noble Lord, Lord Low, for the way in which he made the case in 2009 that carried the day. Nine million items a year are sent free of charge through the Articles for the Blind service. This Bill carries through that decision, a move that will be welcomed on all sides of the House.
It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups. Other Members have said this, and it bears repeating. People with a disability are more likely to use mail services as a means of communication and more disabled people visit the post office to post mail than the average. It can be argued that since Ofcom must consider the cost of the universal service as part of its statutory duties, it may weigh against its general duties to have regard to vulnerable groups.
Regarding the question of delivery costs, I do not know whether it is quite as axiomatic as the noble Lord, Lord Razzall, says. I just point out that it is odd that the competitors seem to gather in the urban areas. They do not seem to be flocking to the rural areas as if it was that good a deal. For once this evening, we are not actually talking through each other and I acknowledge what the noble Baroness, Lady Kramer, said. If we had the facts put in the Library, it would sustain us in further debates on this issue because this seems counter-intuitive. However, I may well be wrong so I am willing to go along with the point that the noble Baroness made.
Ofcom is currently consulting on abolishing its advisory committee on older and disabled customers, which should be a cause for concern. Equally, there are concerns in those parts of the UK which would be most vulnerable to any reduction in the universal service obligation or in the post office network. It has been remarked that small and medium businesses are also heavy users of the Post Office and Royal Mail services. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK. The noble Lord, Lord Empey, put it very well in expressing carefully the value that business and the community put on the services provided by the Post Office and Royal Mail. It is therefore right that there should be an obligation to consult user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas. I urge support for these amendments.
Baroness Wilcox
My Lords, I suppose that I ought to start by saying that I live in Cornwall, which may put the Committee’s mind at rest. I have some idea about the differences of living in Cornwall and in the centre of London. Indeed, I apologise, for so does the noble Baroness, Lady Dean. There are quite a few of us around the Committee tonight.
Amendments 16 and 16A touch on the issues that we will be debating under Clause 11, about the annual report on the post office network, as well as under Part 3 on the regulatory framework for the postal sector. Amendment 16 would require the Secretary of State to consult various groups before a disposal of shares and to lay a report before Parliament setting out how the minimum requirements for the universal postal service, set out in Clause 30, will be maintained. Amendment 16A requires the Secretary of State to submit reports to the devolved Administrations about the impact of proposals in the Bill on post offices, small and medium-sized businesses, communities in remote areas, pensioners and those with disabilities. I hope to reassure noble Lords that the existing and future duties of Ofcom and existing reporting requirements are sufficient to meet their concerns.
I will first address the points raised in Amendment 16 by the noble Lord, Lord Low. Under Part 3, Ofcom will have responsibility for regulating the postal sector and its primary duty in that regard will be to ensure the provision of the universal postal service. The noble Lord, Lord Low, was concerned that Clause 29 would allow the minimum requirements of the USO, particularly the requirement for Articles for the Blind, to be reviewed by Ofcom and changed within 18 months. Let me reassure him that the requirement for a review within 18 months is for the very particular products and services that Royal Mail is required to deliver. It can have no impact on the statutory protections for the minimum USO requirements in Clause 30, including free services for the blind.
The noble Lord, Lord Low, was also concerned that a private Royal Mail could charge higher prices to customers in rural areas. Again, let me reassure him that Clause 30 also provides that pricing of the universal service must be,
“uniform throughout the United Kingdom”.
As I said when we debated Amendment 10, Ofcom will report annually to the Secretary of State on its activities, including the provision of the universal service, and the Secretary of State is required to lay that report before each House of Parliament.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
My Lords, I shall also speak to Amendment 11. These amendments concern the report that the Secretary of State will be required to lay before Parliament after deciding to dispose of Royal Mail, whether through a trade sale or an IPO share sale. We have already put on record the Opposition’s disagreement with the principle of privatising 100 per cent of Royal Mail and that we believe that it should be kept in overall public control. However, in this Committee we are seeking to improve the Bill by casting a critical eye over the detail before us. The Bill might enable Ministers to conduct a sale of Royal Mail, but how they set about that task is important; it can be done well or badly.
We have pointed out some of the dangers that lie before Royal Mail and the country if the Government set about this disposal in the wrong way. So much can go wrong. It could be sold to an owner with short-term horizons who cherry-picks the most valuable parts and breaks up the company, perhaps, heaven forbid, on the road to administration—hence the need for Part 4 of the Bill. The Bill could create a Royal Mail that, against the wishes of Ministers and the current management of the company, decided to break the historic link with the post offices of this country. Either case would be catastrophic for our post office network, and there is nothing in the Bill to prevent them from happening. The company could be sold off cheaply, with a few individuals getting rich at the expense of the country’s taxpayers at a time of public austerity, with taxes going up, public services being curbed, wages being frozen, the retirement age receding and jobs being lost. I hope that Ministers are aware of the public anger that would be unleashed if that happened due to a lack of care and attention by Ministers and civil servants.
We know that in the past many privatisations have resulted in the sale price on the day of sale being dwarfed by the trading price on the first day of trading. The track record of trade sales is not much better. I well recall the Select Committee investigations that ensued when the Royal Ordnance factories in this country were sold, apparently over cocktails between the Minister and a businessman, for the princely sum of £1. The site of the old Enfield rifles establishment and the associated site on either side of the M25 must have been worth a pretty sum on their own. This sort of sale did not instil confidence that the long-term future of the company and its staff would be foremost in the mind of the new owner.
We want to avoid these disasters, as I am sure do the Ministers, and that is why we are bringing forward amendments that might help to make the process safer and more successful. These amendments therefore seek two simple improvements in the report to Parliament: first, to set out clear objectives for the disposal of Royal Mail, not just the process itself but the sort of Royal Mail that we want to emerge at the end of the sale and a clear timetable for action; and, secondly, clear criteria in deciding whether to undertake the disposal. Ministers have made it clear that they would sell to almost anyone. Well, I hope that they will not and that they will show some discretion. They say that they would not sell at any price but give the impression that they would not even obtain an independent valuation, so they will have no benchmark against which to judge whether any offer is too low to accept.
The wording of the amendments might have a familiar ring, but I hope that they will not send the noble Lord, Lord Hunt, racing off to his doctor complaining of another Groundhog Day moment. He need not worry; these are the self-same provisions which the noble Lords, Lord Hunt and Lord Razzall, sought to insert into the 2009 Bill—this is certainly déjà vu—and that were agreed on Third Reading. They were therefore incorporated into that Bill. Imagine our surprise to see them omitted from this Bill, no doubt through some oversight. We simply thought that we would ask why these measures have been omitted and, given their provenance, I am sure that the noble Baroness will have no trouble in accepting the amendment.
The Government have allocated £1.34 billion of funding for the post office network over the next four years of the comprehensive spending review. Fifty per cent is above the social network payments. That is welcome, but what happens in 2015? What happens if a privatised Royal Mail wants to reduce its use of the post office network? After all, we have already witnessed the awarding of one significant contract—the green giro contract—going not to the Post Office but to Citigroup. What happens if there is compulsory competitive tendering for a substantive contract which the Post Office fails to win?
Once again, there are so many unanswered questions. If the Government do not know what the assets of Royal Mail and the Post Office are before moving on to sell Royal Mail or to hand over the Post Office to mutual ownership, they might well sell the people of this country short. That will increase the risk of asset-stripping and of selling at too low a price. That could change the nature of who owns the company and how they run it. Amendment 12A, in the name of my noble friend Lord Whitty, at least seeks to establish a proper record of Royal Mail’s assets in the division between Royal Mail and the Post Office. It also draws attention to the vital inter-business agreement, a subject to which we will return later in the Committee’s deliberations.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I thank the noble Lord, Lord Young, for his most helpful opening words. Telling me that his intention is to enable those on these Benches to make a better Bill is welcome.
The amendments seek to insert additional reporting requirements into the Bill on the Government’s objectives for a disposal and the principal criteria used for deciding to make a disposal. I believe that the Government have already been very clear about why we wish to dispose of shares and the objectives for such a sale. Like the previous Government, we believe that Royal Mail needs an injection of private capital and disciplines. In addition, we also wish to give the employees the opportunity to own shares in the company. We believe that this, along with the other measures in the Bill, is the best way to ensure that the universal postal service is maintained in the United Kingdom.
When making a disposal, we have already stated clear objectives. These are to secure the future of Royal Mail and to ensure that we achieve value for money for the taxpayer. Clause 2 requires the Secretary of State’s report to state the type of disposal that would be made. Quite broadly, this is likely to be either through a sale by auction or through a flotation. It also requires that the timescale for undertaking a disposal be included in the report.
The Secretary of State would not, especially for the first sale of shares, lay a report before Parliament that had two lines stating, for example, that there will be a trade sale and that it will take place in 2012. We know that Parliament would expect more than this. Indeed, we believe that on the occasion of the first significant sale of shares an Oral Statement is likely to be appropriate. As arrangements have to be made for an employee share scheme before any shares can be sold, the report would also include information on how and when the employee share scheme would be set up.
On the suggestion that criteria for deciding whether to sell Royal Mail should be included in the report, at one level we have already set out those criteria—that Royal Mail is poorly served by the Government as its sole shareholder and needs urgent access to private capital and disciplines to secure the future of the universal services. I have doubts, however, about the inclusion of detailed criteria for a sale in a report before a sale is made. The previous Government’s Postal Services Bill 2009 required information to be provided to Parliament on the criteria for a sale of Royal Mail. However, the report in the 2009 Bill would have been presented to Parliament after an agreement had been entered into to sell shares to a third party. Clause 2 of this Bill requires a report to Parliament before a sale. I hope that noble Lords on all sides of this House will welcome this earlier provision of information to Parliament.
As I have said in response to other amendments that we have debated, it would not make commercial sense for the Government to lay all their cards on the table when entering a commercial negotiation. We will have criteria for a sale, but I see no logic in revealing this before a transaction has taken place. Therefore, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I cannot say that we are completely satisfied with the noble Baroness’s response. Nevertheless, we shall reflect on it between now and Report. In those circumstances, I beg leave to withdraw the amendment.
Postal Services Bill
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
I am much supported by my noble friends on this side. They have given every answer that I could give at this stage and I am very grateful to them. I return to Amendment 2 and ask the noble Lord to withdraw it. I am sorry that it is such a long time since I made my argument. I hope that he has kindly remembered it.
Lord Young of Norwood Green
My Lords, I shall address a few of the points that were made. The noble Lord, Lord Cotter, and I do not normally find ourselves so diametrically opposed. We do not see this as a fundamental attack; we see it as a different approach and one that we believe is well worth opposing, given the importance of the decision to privatise Royal Mail 100 per cent. We do not think that putting to the Committee an alternative solution, which was almost unanimously approved by this House, is a fundamental attack.
The noble Lord, Lord Skelmersdale, said that I contradicted myself with Amendments 1 and 2. I do not believe that that is the case. We have to take into account a number of eventualities, depending on how the Bill progresses.
My noble friend Lady Turner reminded us that privatisation is not necessarily always beneficial or effective. My noble friend Lord Lea made an interesting point about undervaluations in previous privatisations, and that should be a warning to the Minister about the importance of getting the sale right.
The sale of shares draws heavily on the Hooper report, and I would not disagree with that. We are not proposing that there should not be any external investment, but there is a fundamental difference between that and a 100 per cent sale. As we go through the Bill, I think that it will pose some difficult problems, one of which—the inter-business agreement and the ability to get satisfactory assurances in that area—we will explore in greater detail.
I shall obviously reflect on this debate. I await Report stage with interest, and we shall see whether we return to this subject then. In those circumstances, I beg leave to withdraw the amendment.
Baroness Wilcox
I can only repeat that, as we all know, the previous Bill failed. We hope that this Bill will succeed. We want as much flexibility as possible when it comes to selling Royal Mail. We have faith in the fact that the people who have worked for this company for so long should be offered the best possible opportunity. We are offering the biggest ever issue of shares to the employees of the company—over 10 per cent. That is a wonderful voice that they will have. No one is saying that no one will finish up on the board. We are saying that we cannot put this in legislation. We need to keep this as flexible as possible to get the best possible price and the best possible deal. The noble Lord, Lord Myners, of all people, City man that he is, knows what I am talking about. I ask that the noble Lord, Lord Young, withdraw his amendment.
Lord Young of Norwood Green
My Lords, it has been a fascinating debate; I did not expect quite as much of a debate as this. This is an important issue. I agree with my noble friend Lady Turner about the value of employee involvement. It is nice to return to agreeing with the noble Lord, Lord Cotter, in his evaluation of the importance of involving the workforce; I wholeheartedly endorse that. My noble friend Lord Brooke demonstrated the value of his experience as a partnership director in NATS.
Several times in this debate people have talked about there being only one representative. The Minister had trouble dealing with that. In fact, I remind the House that the amendment says “at least one”.
My noble friend Lord Myners made a fascinating contribution. I am glad that he told me what a high-conviction portfolio was; I would have thought it was someone being detained at Her Majesty’s pleasure if he had not explained that. His argument was valid when he talked about the question of risk and the way that other shareholders may be able to diversify their risk, but in many cases those employees are pledging all their working life to the company.
The noble Viscount, Lord Eccles, pointed out that there might be a flaw in the amendment, but I remind him that it says “at least one”.
I must admit that I was somewhat disappointed in the Minister’s response. The only argument that she could give us was the need to retain flexibility. Are we really saying that one employee representative—if indeed it were one—would wreck that flexibility? If that were the case, if you wanted ultimate flexibility, then why has she boasted about the 10 per cent employee shareholding? I do not believe that that was a valid argument against the very reasonable suggestion in this amendment.
Having reflected on the debate, I will withdraw the amendment at this stage. We were somewhat puzzled by the pre-emption, but as we are not going to invoke that we can have that argument outside the Chamber. We will certainly return to this subject, probably on Report. In the circumstances, I beg leave to withdraw the amendment.
Baroness Wilcox
My Lords, this group of amendments seeks to add to the Bill a requirement for the Secretary of State to make an Oral Statement and obtain additional parliamentary approval before there can be a relevant disposal of shares in a Royal Mail company.
Amendment 5 of the noble Lord, Lord Young, proposes that an order on the disposal should be subject to the affirmative procedure. The noble Baroness’s Amendments 6 and 17 seek to insert into the Bill a requirement for a super-affirmative procedure before there can be a disposal of shares. Like my noble friend Lord Eccles, I congratulate her on the thoroughness of these amendments which set out clearly the process that is required under the super-affirmative procedure. The noble Baroness may be new to your Lordships’ House but from these amendments it is clear that her knowledge and attention to detail will ensure that its business receives proper and close scrutiny in the years to come. I congratulate her on that. From my noble friend Lord Eccles we received a master class in how to buy and sell businesses. I suspect that I shall lean on him heavily as this Bill goes through to make speeches like that again.
I do not believe that further parliamentary procedures should be required before there can be a disposal of shares in Royal Mail. A committee in the other place has fully debated the disposal of shares as set out in this Bill and this Committee of the Whole House is now debating the issue. The disposal of shares to enable an injection of private capital into Royal Mail is part of a package of measures set out in this Bill which should be scrutinised as a package. The disposal of shares should not be looked at in isolation but alongside the other two essential parts of the package—tackling the pension deficit and reforming the regulatory regime. Richard Hooper emphasised the importance of this package when he gave evidence to the committee in the other place. The noble Lord, Lord Young, asked about the timetable for state aid clearance. We have not at this stage notified the European Commission of the proposed aid but we will do so as soon as we are ready. As I said earlier, this Government have learnt the lessons of 2009. We will take a staged approach to all the steps we need to take before a sale can be completed.
The Opposition’s Postal Services Bill in 2009 did not include a requirement for additional parliamentary procedures before there could be a disposal of shares. As noble Lords opposite themselves said in 2009, additional parliamentary procedures would be unwelcome because they would create uncertainty for potential investors. During the passage of that Bill, noble Lords representing the then Government suggested that noble Lords would agree that the appropriate place for commercial negotiations to take place was not on the Floor of the House.
Noble Lords opposite have expressed interest in the value of Royal Mail. The uncertainty that would exist if a disposal is subject to voting in Parliament would only further reduce the value of the business. This would damage the chances of achieving the best deal for the taxpayer and the company from any future disposal. I fail to see how this amendment fits with other amendments tabled by noble Lords where there has been an emphasis to take forward a sale of shares quickly. These amendments would insert time-consuming mechanisms that would add delay to a disposal.
With regard to legislative provision for the Secretary of State to make an Oral Statement, we do not think that is necessary whenever there is a sale of shares. The Bill is setting the minimum requirements for government action. What is important is the principle that information on this sale should be provided to Parliament. The requirement for a report in Clause 2 applies not only to the first sale of shares but any subsequent sale of shares. I fully accept that an Oral Statement might, of course, be appropriate for the first sale of shares, but would it also be a good use of time if, for instance, five years later Ministers decided to put an extra 100 shares into the employee share scheme? We are committing in Clause 2 that there should be a report to Parliament every time the Government reduce their stake in Royal Mail. We will, of course, discuss with the House authorities the appropriate format for such reports at the relevant times, including whether or not an Oral Statement is appropriate.
Finally, the noble Baroness, Lady Drake, asks in her amendments for evidence of consultation and an impact assessment. I point the noble Baroness to the extensive consultation carried out by Richard Hooper in his two independent reviews on the future of the Royal Mail and the impact assessment published alongside the Bill. On this basis, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I thank the Minister for her response to the contributions. It was another interesting debate. I feel that I have been trumped by my noble friend Lady Drake in her forensic analysis of the super-affirmative procedure. She certainly demonstrated her knowledge of it and her diligence.
This issue is a matter of judgment. I did not expect the noble Viscount, Lord Eccles, to leap to his feet and say, “Yes, I agree with this”. He referred to the behaviour of the market and the introduction of more uncertainty. We balance that against accountability and the ability of Parliament to scrutinise but not negotiate. I look forward to hearing from the Minister when she notifies the European Commission, because that is an important point. She rightly pointed out that there was no provision for an affirmative procedure in the 2009 Bill. However, we were not going for a 100 per cent disposal. As the Bill is further scrutinised, we will analyse the issue of whether Oral Statements are required for a range of future share sales.
I will reflect on the nature of this debate and the Minister’s response. I warn that I may well return to this matter on Report but, in the circumstances, I beg leave to withdraw the amendment.
Baroness Wilcox
My Lords, the amendment seeks to ensure that the Secretary of State lays a report before Parliament before there is a sale of shares. I shall talk quickly, because I am worried about the blandishments of the noble Lord, Lord Hoyle, influencing me before I reach the end. I believe that the drafting of the clause makes it clear that the report should be laid before a disposal of shares is made. The clause requires the Secretary of State to lay a report as soon as reasonably practicable after a decision has been made to undertake a sale of shares.
The arrangements needed to organise a disposal of shares in Royal Mail to a trade buyer through a competition or to conduct a public flotation would take several months. It would not be the case that the Secretary of State would decide over breakfast to sell shares in Royal Mail and then complete the sale by the time we in this House enjoy our evening dinner. It simply would not happen that way. The starting gun for work on the specific arrangements for a sale would be a decision by the Secretary of State to undertake a sale. Under the Bill, the Secretary of State has to lay a report before Parliament as soon as reasonably practicable after a decision is taken to dispose of shares. This would be before a sale of shares. I therefore kindly ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her response. I must admit that had I known that the blandishments of the noble Lord, Lord Hoyle, would be that effective I would deploy him more regularly and more often. That way, we might achieve acceptance of at least one amendment. We have gone from considering affirmative and super-affirmative procedures to a report. Blandishments from me or the noble Lord, Lord Hoyle, seem to be of no use whatever. Nevertheless, we still believe that this is a reasonable request. It is part of what we would describe as accountability and scrutiny. For the time being, I beg leave to withdraw the amendment—again, on the understanding that I may well return to this matter on Report.
Financial Reporting Council: Annual Reports and Accounts
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 10 months ago)
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Baroness Wilcox
My Lords, as I just said, as the law stands, you are fully entitled to a printed copy of the report and accounts. So there is no reason why that should occur unless you have asked for it to be online, in which case you can download as much or as little of it as you like. We fully agree that it is very important that the report and accounts are clear, accessible and have the information that shareholders require. That is why we are looking at it now. We are consulting and will report at the end of March on some of the changes that we may be able to make to make things clearer.
Lord Young of Norwood Green
Does the Minister agree that there is some environmental gain to be had from people opting to receive these reports online when so many of them are unread or ignored? As she said, there is a question of opting in to this. Does she also agree that it is more important that the report contents are more transparent and accountable, demonstrating that all the remuneration and reward systems are linked to long-term success and showing that active steps are being taken to narrow the widening gap between the highest and lowest paid? While the companies are at it, perhaps they could also tell us how many apprentices they have. Finally, we ought to put our own house in order. We circulate more than 800 copies of this publication, for example. We could put it online.
Baroness Wilcox
Yes, my Lords, I suppose that that might save a few trees but at the moment, under law, we have to provide printed copies. I am sure that if your Lordships' House decided that it wished to debate the matter again, we might hear a lot more new ideas. I thank the noble Lord for the advice.
Citizens Advice Bureaux
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 10 months ago)
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Baroness Wilcox
With the local authorities, consultation happens at all times and at all levels to make sure that money is being as well spent as possible. One of the things that we try to emphasise to local authorities is that the voluntary sector is enormously good value for money. This is one of the reasons why these bureaux have been so successful, manned as they have been for so many years by volunteers—since 1939, I think, or 70 years continuously. They certainly are to be congratulated.
Employment Law
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
My Lords, I believe that not to be so. We hope to put in place all sorts of measures to ensure that employers behave as they should. The consultation period should be open to as many people as possible. We hope that many will take the opportunity to help us to ensure that we get this legislation correct.
Lord Young of Norwood Green
My Lords, is the Minister really saying that it will take more than a year for an employer to assess whether an employee is suitable in their employment?
Baroness Wilcox
I heard a voice from behind me. I apologise. Would the noble Lord mind repeating his question?
Lord Young of Norwood Green
My Lords, is the Minister really saying that it takes more than a year for an employer to assess whether an employee is suitable in their employment? Does she agree that part of the problem, and the reason why there are so many employment tribunals, is the lack of knowledge and application of current employment laws?
Baroness Wilcox
I shall be careful how I answer the noble Lord because, just a little while ago, he was standing where I am standing. I think we are on the right track with this. We have so much evidence that small businesses in particular are not employing people. They are not growing as they should and they are afraid of taking on people and having to go to tribunals. All in all, I think this is the right way to go forward.
Design
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 10 months ago)
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Baroness Wilcox
My Lords, I am aware that, as chairman of the Design Council, the noble Lord has a particular interest in this subject; if I remember correctly, he made it the centre-point of his maiden speech in your Lordships’ House. The Government recognise the excellent work of the Design Council in promoting the use of design to create more efficient and effective public services. For example, Lewisham Council’s homelessness service now costs £1.2 million less than in 2008 as a result of mentoring through the Design Council’s Public Services by Design programme. There are other excellent public sector examples, such as in the NHS, as we have heard, and the Department of Health’s collaboration with the Design Council. These programmes have helped to raise awareness of the value of design across government. I know that this is an absolute personal crusade for the noble Lord, Lord Bichard, and no doubt he will continue to ask me questions in this area until we have fulfilled his every want.
Lord Young of Norwood Green
My Lords, the UK’s internationally recognised strength in design was built on 150 years of investment in design education in some of the world’s best colleges. The Government’s HE funding system takes no account of the economic value of any subjects, apart from science, technology, engineering and maths. If design is mission-critical to UK plc, as the Minister suggests, will she say how much will be invested in English design education in the 2011-12 academic year and what policy guidance the Government will provide?
Baroness Wilcox
Future funding for all university courses will increasingly flow from graduate contributions. Our universities will be able to secure an equivalent flow of income and, if their course provision remains attractive to students, some may be able to attract more income. Universities must consider, therefore, how to structure and design their courses in ways that make them as attractive as possible to students. The students will be making the choices, so the more attractive the courses, the more students they will attract.
Public Bodies Bill [HL]
Debate between Lord Young of Norwood Green and Baroness Wilcox(13 years, 11 months ago)
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Lord Young of Norwood Green
As a number of my noble friends have said, there are real concerns about the viability of the coalition Government’s proposals on the vital issue of consumer representation. As my noble friend Lady Hayter reminded us, Consumer Focus was created under the Consumers, Estate Agents and Redress Act 2007. It was a new organisation, carefully designed with good planning and as a result was implemented with widespread support. It has become the acknowledged champion for consumers in England, Wales and Scotland, and for postal customers in Northern Ireland.
I think my noble friend Lord Borrie talked about the enthusiasm of the chief executive of Citizens Advice for the new role, and I reflected on the comments of the chief executive of Consumer Focus, who said:
“Consumer Focus has achieved big wins for consumers in just two years—including a £70 million energy bill refund and cash ISA reforms saving over £15 million a year. We’ve delivered our biggest results in the last few months but the biggest challenges for consumers are ahead, with major reforms to the energy, post and financial services markets … What matters now, is that the transfer happens in a way that works in consumers’ interests. The expertise and knowledge that has enabled us to fight for consumers must not be lost. Changes must not be at the expense of the public’s rights and needs—which organisations like Consumer Focus were created to protect”.
That is an important and interesting comment.
There has not been much reference to the role of trading standards. The response states:
“Trading Standards is at the centre of the Government’s proposed new regime. Local challenges to fair trading will continue to be handled at local authority level, but national and regional consumer challenges will be handled by one or more dedicated, expert teams, within Trading Standards with work co-ordinated nationally for this purpose”.
Perhaps the Minister in her reply can expand on that national role of trading standards. It also states:
“In respect of Scotland and Wales, specific arrangements may need to be made”.
In the light of this debate, that is perhaps a bit of an understatement.
I am conscious of the time, so I will cut my contribution much shorter than I had intended—for which relief, much thanks; I see the Minister nodding. I cannot help remembering, given the history of inflation that we have heard tonight, negotiating a wage increase of about 23 per cent during that period in the 1970s. I was reminded of those heady days.
I shall make a couple of quick points in summation. At the moment, Consumer Focus receives approximately one-third of its funding from BIS. The remainder is gained from a mixture of licence funding paid by energy suppliers and the postal industry and funds that it may raise itself—for example, through externally funded projects. I add my voice to the cause and ask the Government whether they yet know how much it will cost to outsource those services to a local community group. What proportion of that money will come from the Government? How will the plan help to ensure that the body performing those functions is more accountable? A thread through what, as a noble Lord already said, has been an authoritative and interesting debate is that question of accountability either to the people that the body seeks to serve or to the funding providers—in the case of the Government, the funding providers being the British public. In the interests of time, I will let the Minister respond.
Baroness Wilcox
My Lords, this has been an amazing debate. I knew that it would take some time, but I hope that the noble Baroness, Lady Hayter, will be pleased at the amount of time and thought that has been put into some of the speeches heard here tonight—I know that I have been. It has been a real trip down memory lane too. The only person who seemed to be missing was the noble Baroness, Lady Williams, who, I believe, in those distant days gone by, set this all going in the first place. It is amazing who we have heard from: the noble Lord, Lord Maclennan, the noble Lord, Lord Whitty, the noble Lord, Lord Borrie and too many others. I shall try hard to answer some of the questions, but I hope that noble Lords will understand that, given that it is six minutes to 10, I will try not to keep you here past 11 o'clock. Settle on down then.
Consumer Focus has been placed in Schedule 1 because the Government believe that its functions will be better carried out by transferring them to the citizens’ advice service, which includes Citizens Advice and Citizens Advice Scotland. There will therefore be no need to retain Consumer Focus. The National Consumer Council, in its original incarnation, has a proud record. Over three decades, it established a fine reputation for representing the interests of consumers through careful research, robust policy development and by using its influence with policy-makers. I, of course, declare an interest as a former chairman of the National Consumer Council from 1990 to 1996. Prejudiced though I may be, I say that it was certainly right for its time.
The previous Government merged the National Consumer Council with Energywatch and Postwatch; and the new National Consumer Council, which took the name of Consumer Focus, opened its doors for business in October 2008. I recognise that barely two years have passed, but over those past two years, Consumer Focus has eagerly grasped its new range of powers and responsibilities on behalf of consumers. I pay tribute to the noble Lord, Lord Whitty, who chaired Consumer Focus with flair and commitment from the very start until stepping down rather loudly and cross only in November last year.
I will try to answer some questions as I go, which may distort the speech a bit, but will give some answers. The noble Baroness, Lady Hayter, asked whether abolition of Consumer Focus means that the Government are giving up on consumers. Not at all. The Government will continue to provide funding for these objectives, which we regard as highly important, and we see Citizens Advice as the most effective conduit to deliver the desired outcomes.
What about vulnerable consumers? Consumer Focus and its predecessors have played a very important role in this area. Citizens Advice also has substantial experience of addressing the needs of vulnerable people across a wide range of subject areas and we are confident that it will be able to deliver the outcomes with no loss in quality. While Consumer Focus currently assists around 7,000 customers directly, Citizens Advice is advising and supporting millions of individuals. Citizens Advice also has well developed policy and research functions as will be known to some noble Lords.
The noble Baroness, Lady Deech, asked whether the Government need to look at the whole landscape of consumer protection right across the economy and make it more effective for consumers. I agree. The Government’s proposal is further to improve consumer protection and advocacy in general and we believe that the shift of Consumer Focus’s role to Citizens Advice will deliver those services and protections closer to the citizen via the network of citizens advice bureaux, making it even more relevant and effective than it currently is.
The noble Lord, Lord Whitty, asked whether vulnerable consumers will be those who lose out most. The Government propose to transfer Consumer Focus’s statutory powers with regard to vulnerable consumers to Citizens Advice. Discussions about how we can achieve this appropriately are still going on with Citizens Advice and internally within BIS.
My right honourable friend the Secretary of State for Business, Innovation and Skills announced on 14 October last year that the Government would consult early this year on proposals to rationalise the functions of consumer protection bodies, eliminate confusion and duplication, strengthen local delivery and provide a stronger role for front-line consumer services. This is what we hope will be achieved.
We are taking the next, great, positive step forward in consumer advocacy, building on the strengths, the expertise and the bold initiatives that have gone before and of which we have heard so much tonight. Consumers need protection no less now than in the past. Increasingly sophisticated products and services need an increasingly clued-up consumer to take maximum advantage and avoid coming a cropper in the marketplace. We need to deliver assistance and advice to individual consumers at the point of need at a local level. At a national level, we need a body to continue with quality research which is capable of taking on the big policy issues of the day and fighting for the consumer interest with businesses, regulators and Government.
The noble Baroness, Lady Deech, says that things have never been worse. Maybe she is the consumer on the Clapham omnibus and not one of us who have been involved deeply in our parts of the consumer world and do not like to see any of the bits we were involved with go. Maybe her voice is the one we should be listening to now.
Citizens Advice is widely recognised and trusted by the public. It has a distinct advantage which we should seek to turn to our advantage. It has local representation, through the citizens advice bureaux, in communities throughout the country. It offers a presence on the high street so that people can call in to get advice and information. It can cater for those who need personal contact people who are not necessarily comfortable with a telephone or online service. It can assist vulnerable consumers face-to-face, identify problems and help with solutions. Citizens Advice has an excellent track record of advocacy on behalf of consumers at a national and local level. We therefore intend to direct almost all central government resources for non-financial consumer education, information, policy and advice to Citizens Advice.
Public Bodies Bill [HL]
Debate between Lord Young of Norwood Green and Baroness Wilcox(14 years ago)
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Lord Young of Norwood Green
My Lords, noble Lords will be relieved to hear that I do not propose detaining us for long, because my noble friend Lord Borrie has put the kernel of the case. I just want to make a couple of points. We are told that a working group is currently examining the case for abolishing this body. Early in 2011, it will report to the Secretary of State for Justice and the Secretary of State for Business with its recommendations. No final decisions will be taken before then. Apparently, the working group consists of BIS, TS, HMT and Competition Service officials. It is examining all the relevant aspects of a possible transfer and abolition, including financial, legal, judicial and policy. It aims to produce a report for Ministers that sets out the pros and cons of such an abolition and transfer. If that consultation is taking place, it seems to us rather strange that this should appear in Schedule 1. Would it not be preferable if we awaited the outcome of the consultation process? All the other points in relation to this have been made. Given the time, I await eagerly the Minister’s response.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I thank the noble Lord, Lord Borrie, for his amendment because it means that we have to look carefully at what we have said and what we are doing. With his background in the Office of Fair Trading and my experience of working with him over the years, I know how valuable his opinion is in these matters. He has rightly said that the Competition Appeal Tribunal was created by the Enterprise Act 2002. It hears appeals on competition and regulated industry cases and is independent from other competition bodies, such as the OFT and the Competition Commission, because it hears appeals against their decisions. Rightly, he explained how special it is.
The Competition Service was created by the Enterprise Act to provide administrative and other support to the Competition Appeal Tribunal. It has no function other than being a service for the Competition Appeal Tribunal. The Government believe that the way in which this function is being provided is not making the most effective use of resources and that there may be cost savings and increased efficiencies if the functions of the Competition Service were transferred to the Tribunals Service, to which the noble Lord referred.
The consequence of this would be transferring the Competition Appeal Tribunal, which would then receive its support from the Tribunals Service. The Competition Service would then be abolished. However, no final decision has been taken. As the noble Lord, Lord Young, said, a working group has been set up to test the case for making this proposed abolition and transfer. It is a decision that we will not take lightly. The working group will report to Ministers in BIS and the Minister of Justice in early 2011. They will then decide whether to proceed with the abolition and the transfer. In carrying out this review, the Government are clear that there should be no adverse impact on the operation of the Competition Appeal Tribunal, which would operate as an independent tribunal under the aegis of the Tribunals Service. I hope that the noble Lord, Lord Borrie, finds that reassuring.
Export Control (Amendment) (No. 3) Order 2010
Debate between Lord Young of Norwood Green and Baroness Wilcox
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the proposal before us is for an order under Section 6 of the Export Control Act 2002. The effect of this order would be to control the export of the drug sodium thiopental to the United States of America. It prohibits the export of sodium thiopental to the United States unless the exporter has first obtained a licence from my right honourable friend, the Secretary of State for Business, Innovation and Skills.
Sodium thiopental is an anaesthetic widely used in the United Kingdom and Europe, but it is also used in several states in the United States of America to anaesthetise prisoners prior to execution. For several months there has been a shortage of sodium thiopental in the United States, which has caused at least some individual states to seek supplies of the medicine elsewhere. There is evidence that the state of Arizona obtained the sodium thiopental used in a recent execution from the United Kingdom. On 28 October 2010, Leigh Day & Co, solicitors acting for Mr Edmund Zagorski, a prisoner on death row in Tennessee, wrote to my right honourable friend in another place inviting him to place controls on the export of sodium thiopental. While affirming the United Kingdom’s opposition to the death penalty in all circumstances, my right honourable friend declined to impose export controls on the drug. His primary concern was that he should not take action which might cause delays in the export of a medicine which some patients may need.
The High Court granted permission to Leigh Day & Co to conduct a judicial review of my right honourable friend’s decision. In light of this, he reaffirmed on 12 November his decision not to impose a control. He reiterated that there remained a possibility of significant legitimate trade in this important medicine and that it was unlikely that an order to control its export would be effective in preventing any execution. The first hearing of the case took place on Wednesday 17 November. On 22 November, the court indicated that it would dismiss the claimants’ arguments that my right honourable friend was under a duty by the European Union Charter of Fundamental Rights or the common law to make an export control order. The court refused to grant interim relief, which would have required him to make a control order. The court adjourned the claimants’ public law challenge, which was due to be heard on Monday 29 November. In the mean time, however, all parties sought to clarify the extent of any possible lawful trade in sodium thiopental. Having consulted United States lawyers, they all agreed that, under applicable federal law, it is not currently lawful to import sodium thiopental into the United States for medical purposes. Moreover, in the course of the legal action, it was established that sodium thiopental is at present hardly ever used for legitimate medical purposes in the United States of America—although, as I have indicated, it is used widely as an anaesthetic around the world. These two discoveries mean that an order controlling the export of sodium thiopental to the United States of America should not, in fact, have any adverse impact on patients in the United States of America or on UK exporters.
The order before us reflects the particular circumstances of the United States of America and applies only to that country. The United States of America is unique in that sodium thiopental is not currently used there in medicine but is used for capital punishment. An order which controlled the export of sodium thiopental more widely would have affected legitimate medical trade in a way that this order would not. On 29 November, my right honourable friend decided that these new developments significantly strengthened the arguments in favour of a control order. Such an order would serve to underline the United Kingdom’s moral opposition to the death penalty in all circumstances without affecting legitimate trade. My right honourable friend therefore announced that he would make an order under Section 6 of the Export Control Act 2002, controlling the export of sodium thiopental from the United Kingdom to the United States. The order came into force on Tuesday 30 November. From that date, any person seeking to export sodium thiopental from the United Kingdom to the United States of America requires a licence issued by the Export Control Organisation, which will refuse a licence if the stated end use is execution, or if it considers there to be an unacceptable risk that the drug will be diverted for use in execution. In the latter case, it would assess the risks case by case in the light of all relevant factors. A breach of the order is a criminal offence.
Noble Lords may wish to note that the control order covers both the direct and indirect export of sodium thiopental from the United Kingdom to the United States of America. The indirect control applies when the destination is not the US, but the exporter knows that the goods will be re-exported and that the ultimate destination is indeed the United States.
The order was laid before Parliament pursuant to the procedure in Section 13 of the 2002 Act and, unless approved by a resolution of each House within 40 days, it will cease to have effect. Orders made under Section 6 last for a maximum of 12 months. On the basis of the facts that I have outlined, I conclude by commending this order to the Committee. The operation and effect of the order will be kept under review in the light of factual developments.
Lord Young of Norwood Green
My Lords, I do not think that we will detain noble Lords for long on this order. I welcome the Government’s full explanation and clarification that the order will require a Secretary of State licence, whether it is direct or indirect control, which is important. I also welcome the assurance that there will be a monitoring and review process. I cannot help but ask one question, as a result of the O-level chemistry that I never got. Like the Minister and the Explanatory Memorandum, I always refer to the drug as sodium thiopental, but I notice that the order reverses that and refers to thiopental sodium. From mere curiosity, I am wondering why that is the case. I hope that those behind the Minister who know the answer to everything will tell us why the words have been reversed. That aside, I welcome the Government’s decision.
European Single Market
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
The United Kingdom is not a member of the euro at the moment, and I see no time in future when we are likely to ask to join.
Lord Young of Norwood Green
My Lords, given the divergent views on Europe in the coalition Government, does the Minister agree with the British Chambers of Commerce that Governments find it difficult to agree the harmonising measures that are essential to making the single market work? What harmonising measures will the Government support?
Baroness Wilcox
The coalition is working extremely well. There are certainly good points in the plan. Spreading the word is one recommendation in the report. We agree with that. SMEs having a level playing field? We agree with that. Proposals being SME-proofed so that the legals do not work against them? We agree with that. The liberalisation of services? Excellent. Moving architects backwards and forwards? We should be able to do that. Creating a digital single market? We want to do that. A single market in energy and freedom of movement there? We want that. Freezes on new laws that cost jobs? We will have to discuss that. Rebalancing the EU budgets towards growth? That is exactly what the report was about. It is an excellent report and we are very happy to support most of it.
National Minimum Wage (Amendment) (No. 2) Regulations 2010
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
That was exactly the point that I was coming to. When the Minister said that she would “consider”, did that mean that she is not committed to accepting the recommendations of the Low Pay Commission? Are the Government prepared to accept its recommendations, as previous Governments have done?
Baroness Wilcox
I am told that this Government never commit—at least, not at this moment—so I think that I just have to say that we are considering the Low Pay Commission’s recommendations.
Economy: Manufacturing
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
My Lords, I begin by thanking the noble Viscount, Lord Montgomery, for securing this debate on the value of manufacturing to the United Kingdom. As he said, he set the scene; as far as we are concerned, it could not have been more timely given some of the announcements that we have made. The noble Lord, Lord Willis of Knaresborough, is to be thanked for giving up his birthday to be here and for his thundering good speech, on which we will reflect carefully. Of course, we welcome his celebration of UK manufacturing, which was very heartening to hear. Contrary to something that he said about the manufacturing framework, it has not been pulled; we are planning to announce it shortly and it will be set up with the necessary conditions.
The principal aim of the coalition Government is to return the United Kingdom economy to growth, but it needs to be a different sort of growth from what we have seen in the past, as the Chancellor and the Business Secretary reiterated yesterday. We must achieve growth that is more evenly balanced across the country, in the north as well as in the south, and growth across the range of business sectors, because we can no longer rely on just a handful of industries. We need growth that is sustainable and not so heavily based upon household consumption that is driven by personal debt or ever-increasing government spending. The alternative is an economy founded on greater levels of business investment, more export sales and a strong manufacturing base. Indeed, manufacturing already accounts for more than 50 per cent of United Kingdom exports, and contributes £140 billion annually to our economy. To respond to the question from the noble Viscount, yes, £140 billion is directly generated by manufacturing, but it also generates a lot of additional revenue. For every factory producing goods, there are accountants, designers and other service providers employed as well. Manufacturing accounts for 75 per cent of all industrial research and development investment and, with about 2.5 million jobs, accounts for roughly 8 per cent of total UK employment.
In the spending review, we took a number of tough decisions in order to tackle the deficit bequeathed to us by the previous Government, but we have also announced the areas in which we intend to invest what are, inevitably, limited financial resources at the moment, all with a view to growth. That investment will be in such things as in transport links and digital infrastructure, as well as £250 million in an additional 75,000 adult apprenticeship places, along with the apprenticeships that we already look to.
I have a question here about apprenticeships from the former Minister himself: are we ignoring the 16 to 18 apprenticeships? No, we are not. We are just trying to expand it and allow people the opportunity to retrain in adult life, and we are looking at the sort of apprenticeships that girls take up; they take up 50 per cent of the apprenticeships in this country but they tend to be in the caring, hairdressing or beauty professions, and we would like to see our girls encouraged at school with, as the noble Lord, Lord Cotter, mentioned, much better careers advice than we have seen so far—careers advice that goes right through from schools to further and higher education, so that that advice can be at all ages, at all times in life, to get those changes through.
We are creating a green investment bank with an initial budget of £1 billion so that the UK gains a technical and competitive edge in clean technologies and, perhaps more directly relevant to this debate, we are investing about £200 million to support the small and medium-sized enterprises in manufacturing. However, I take on board what the noble Lord, Lord Willis, said; we will reflect on the fact that we must remember that our big industries are very important.
All these measures, however, will benefit the manufacturing base, as will our reforms aimed at simplifying the tax system. Three or four of your Lordships talked about the tax system and simplification. We are well aware of trying to pull the Government off people who are trying to get their businesses going and instead simplify the tax system so that people know exactly where they are. We are reducing the main rate of corporation tax from 28 per cent to 24 per cent over the four years from April 2011, and the small-profits rate from 21 per cent to 20 per cent. The same goes for our assault on unnecessary red tape. New regulations are permitted now only a “one in, one out” basis.
Yesterday’s growth review announcement is the next stage in the process. Each government department must now identify and remove further barriers to economic growth. The review will also include a detailed look at advanced manufacturing, for which we will publish an action plan to coincide with next year’s Budget.
I know that we are time-limited, so I will briefly address some of the points that were made. The noble Lord, Lord Wade, made a blizzard of a speech on behalf of the north-west that picked up on so many things: inertia, lack of urgency, the fact that business wants “Yes” so let’s get it done, and so on. I hope that pulling the Government back off and some of the other things that I have talked about so far will help with that. He talked about local government not really getting to grips with the task.
We have also talked about LEPs, and we are certainly going to be moving on that. We have invited 25 local enterprise partnerships to form the local boards. The department has already held a workshop with the first 24 successful LEPs to discuss a wide range of policy issues, and that dialogue will continue. To answer the noble Lord, obviously we know that there are a lot more of these LEPs to come, but some of the contributions that they put forward were not going to work in the form in which they were submitted the first time around, so we are working with them right across the country to get the LEPs through. We have used them to replace a system that was using an enormous amount of money, the sort of money that we do not have left any more, and was not bringing the north and south together at all.
Lord Young of Norwood Green
Before the Minister sits down, the question that I would like answered, perhaps in writing if she cannot answer it today, is on funding for LEPs.
Baroness Wilcox
Unless I get this terribly wrong and they make me sit down—no, I had best not answer. Shall we write? It would be easier. We shall make a minute now, and I shall get through my brief. I will come back to the noble Lord, although I think that we have explained this fairly well.
Where is the growth White Paper? Our priority is to secure the economic recovery. Our growth paper and review, launched yesterday, set out how we will create the conditions for private sector growth. The decisions of business leaders, entrepreneurs and individual workers will build our future economy, which is why we are launching a growth review where the Government are inviting business to take part in a review of how each part of Government can address the barriers that are facing industry. It will include a detailed look at advanced manufacturing, producing an action plan at Budget 2011.
The noble Lord, Lord Bhattacharyya, is one of the great gurus of this country and it is always a great delight to listen to him speak. It does not matter to me which side of the political spectrum he stands on to speak; it is wonderful to hear him. On foreign direct investment, the UK has the third-largest stock of inward foreign direct investment in manufacturing in the OECD, for what that is worth. About one-third of the 1,600 new inward foreign direct investment projects in 2009 were in the areas of advanced manufacturing, life sciences, ICT and environmental technology. However, I will reflect on the noble Lord’s words today. I can always learn something whenever he speaks.
The noble Lords, Lord Brooke of Sutton Mandeville and Lord Cotter, talked, rightly, about the shortage of engineers. We recognise that it is still a problem for us. We welcome the comment by the noble Lord, Lord Cotter, and we support the move towards vocational training. He spoke in particular about apprenticeships. I think that is about all I can manage at the moment. Two minutes left—okay.
There is no question that manufacturing has a central role to play in the growth agenda. The UK has strengths in a diverse range of sectors from well established industries, such as aerospace and chemicals, to fledgling ones such as plastic electronics and composite technologies. We also know that major opportunities exist in new materials and new markets, especially in low carbon. Britain is the largest single market for offshore wind in the world and is already an attractive place for inward investment. Gamesa, a Spanish wind turbine manufacturer, is just the latest company to announce its intention to move here. It intends to invest £130 million by 2014 and expects to create more than 1,000 jobs, stimulating about 800 more jobs in the supply chain. There are further signs that manufacturing is beginning to move in the right direction after weathering what was, we hope, the worst of the global recession. For example, in 2009-10, inward investment in manufacturing generated 94,000 jobs, which was a 20 per cent rise on the previous year. Last week, a survey of 300 companies conducted by the Engineering Employers Federation found that UK manufacturing is growing at its fastest rate since 1994.
Let me see how quickly I can go. Both government and industry want to see UK manufacturing grow further. We cannot leave this to chance. We will shortly be launching a new manufacturing framework setting out the necessary conditions for a resurgence in UK manufacturing. The opportunities are there in overseas markets characterised by rising incomes and burgeoning demand, in the availability of new technologies and materials from our own science base and in the new business models that combine manufacturing and services to maximise revenue. Indeed, the framework will lay the foundations for a more co-ordinated approach that will complement the review of advanced manufacturing that I referred to previously.
Although it is the conviction of this Government that growth will best be achieved through a combination of private investment and a propitious business environment, we are under no illusions that the latter is yet within reach. Indeed, the former is heavily predicated upon the latter, and investors expect much more than warm words. Nevertheless, we are confident that our approach is the right one, and we will pursue it with vigour in order that Britain once again becomes synonymous with manufacturing. It only remains for me to thank the noble Viscount, Lord Montgomery of Alamein, for raising this issue of such national importance today.
Minimum Wage
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
We are unlikely to look at this. However, in BIS we pay interns a wage and things seem to be going very well.
Lord Young of Norwood Green
Does the Minister agree that the problem with unpaid internships is that they discriminate against graduates from poorer households? Can she confirm that the Government will build on programmes introduced by the previous Government, such as the graduate talent pool and the scheme with the Federation of Small Businesses to encourage its members to create a number of opportunities?
Baroness Wilcox
In 2009, the Department for Work and Pensions announced a series of temporary measures, which the previous Government of course took forward. We have been using those measures and will do so until the end of this financial year. As we emerge from the recession, we will introduce more effective support for young people and the unemployed. A new work programme is coming out in the new year and we will be happy to bring that forward.
Regional Development Agencies
Debate between Lord Young of Norwood Green and Baroness Wilcox(14 years, 1 month ago)
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Baroness Wilcox
My noble friend is very helpful. It is worth remembering that the Secretary of State has just been in China doing business for Britain, and we are proud of him for doing that.
Lord Young of Norwood Green
My Lords, is the Minister aware that independent research has shown that, under the plans announced by the Government, significant areas of the country will not be covered by the new local employment partnerships? Nearly 21 million people and 780,000 businesses have been excluded from local employment partnerships, with some areas, such as the north-east and the south-west, being very badly hit.
Businesses are also sceptical about the proposals. The EEF—the manufacturers’ organisation—has said that many of the proposals fail to make their mark with manufacturers. Nor did the proposals get a much better press from the CBI director-general, Richard Lambert. For the record, it was not the noble Lord, Lord Liddle, but the Secretary of State who prayed in aid Chairman Mao. Has the Minister taken into account the economic impact of the failure to appoint LEPs in various parts of the country?
Baroness Wilcox
We have appointed 24 LEPs, others are coming through and very interesting combinations are coming together. The partnerships are local and are working extremely well, so I do not think that we are doing too badly. It is worth remembering that, when the Liberal Democrats and Conservatives talked to businesses before the election, we were told over and over again that the RDAs were doing no good job whatsoever and that, the sooner they were gone, the better.
European Communities (Definition of Treaties) (Central Africa Interim Economic Partnership Agreement) Order 2010
Debate between Lord Young of Norwood Green and Baroness Wilcox
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the economic partnership agreements, or EPAs, with Cameroon and Côte d’Ivoire set in place a secure trading arrangement between these countries and the European Union to promote development-friendly trade. The arrangement is compatible with the World Trade Organisation’s provisions.
The agreements mean that Cameroon and Côte d’Ivoire will receive duty-free, quota-free access to European Union markets. Without them, these countries would face tariffs on up to 25 per cent of their exports, including on industries critical to their economies such as bananas and cocoa.
The EPAs allow Cameroon and Côte d’Ivoire to remove their own tariffs gradually, over 15 years, and each contains safeguards enabling them to protect infant industries and prevent import surges. However, in accordance with the wishes of Cameroon and Côte d’Ivoire, the EPAs do not include provisions on services, investment, procurement, intellectual property or other “deeper integration issues”.
Each agreement also contains a chapter on development, ensuring that Cameroon and Côte d’Ivoire receive the development assistance they need to make the most of the opportunities created by the EPAs. As a first step, in September 2009 the European Union signed off a €97 million package for Cameroon to accompany its EPA and to help boost its economy and trade activities. The UK is committed to monitoring this money closely to ensure that it is spent wisely and achieves the maximum impact on poverty reduction.
The benefits generated by duty-free, quota-free access to the European market and by improved rules of origin are the areas in which the EPAs will most quickly bring benefits. Without them, for example, the tariff on banana imports from Cameroon and Côte d’Ivoire would be €148 per tonne.
In the longer term, the biggest benefits will come from the increased trade and investment that will flow from Cameroon and Côte d’Ivoire removing their own tariffs and moving towards more open economies.
No nation can achieve prosperity by closing its borders to trade. Indeed, the World Bank’s 2008 Global Monitoring Report calculated that removing all trade tariffs could reduce the headcount poverty index by 5 to 6.5 percentage points over a 10-year period. A 1 per cent increase in Africa’s share of world trade would generate about $70 billion of additional income annually, which is about three times the total aid that Africa currently receives. So by removing tariffs and promoting free trade, the EPAs will deliver lasting benefits to Cameroon and Côte d’Ivoire, and to Britain.
To secure these gains for Côte d’Ivoire and Cameroon, we need to ratify these two EPAs. By agreeing to the orders today, the Committee will allow us to proceed without delay.
Lord Young of Norwood Green
My Lords, I welcome the Minister’s opening remarks on the orders. She will be reassured that we largely welcome the agreements. The trading agreements are designed to support parts of the African economy and should benefit workers in training and employment generally. In turn, businesses and workplaces will be made safer and more efficient. As the Minister said, economic partnership agreements are intended to be broad agreements that help to build regional markets and diversify economies in the African, Caribbean and Pacific regions, before opening up the international benefits of increased, balanced and sustainable trade between the regions. They will change our relationship from one that offers tariff preferences to one that builds lasting and more efficient regional and international markets for the ACP regions.
The ACP economies are too small to go it alone and regional integration has the potential to boost local trade and to create larger markets, which will attract trade and investment. Eliminating the barriers between neighbouring countries and creating real integration favours trade exchanges and boosts economic growth. It also creates bigger markets that are more attractive to investors, and facilitates trade with landlocked countries. We have already heard from the Minister about the benefits of trade with Africa overall.
I have no criticisms of these agreements, but I would appreciate clarification from the Minister on a number of points. First, on the central Africa agreement, noble Lords will note that Cameroon is the only central African country to have signed the document. Its strong links with the EU are well documented. It is estimated that 61 per cent of its exports go to the EU and 56 per cent of its imports come from the EU. Will the Minister confirm that the agreement will strengthen the quality of the Cameroon economy, which might benefit its trade dealings outside the EU? Does she expect the agreement to be superseded by one that includes the seven countries of the Economic and Monetary Community of Central Africa and, if so, when? Are there plans for the agreement, or any future agreement, to be extended to cover not only goods but services? The Minister has spoken of the specific requests of Côte d’Ivoire and Cameroon that these be goods-only arrangements, but are there plans for wider arrangements that include services?
Obviously there are gains to be had when the less developed members of such trading arrangements gain fairer access to larger markets such as the EU. However, that is not the only prize. There is an opportunity to improve access to the larger, more developed markets of fellow African continental members. Does the Minister agree that that in itself is a big prize in expanding the membership of the central Africa group?
Finally on this agreement, is the Minister satisfied that the gradual reduction of tariffs on goods entering from the EU, such as vehicles, chemicals and power generation equipment that are not manufactured in Cameroon, will reduce production costs and product prices in the Cameroon economy quickly enough?
Will the Côte d’Ivoire agreement be a stepping stone to securing a larger agreement that encompasses more of western Africa? Whereas the EPA covering Cameroon has been established in preparation for a possible expansion under the central Africa banner, I am concerned that the Côte d’Ivoire EPA is restricted to just the one country. Will the Minister update noble Lords on the progress of the discussions on securing similar agreements with Côte d’Ivoire’s neighbours, in particular Nigeria and Ghana, but also other members of the Economic Community of West African States? When might we expect to see further developments towards a regional-based agreement for west Africa?
Countries such as Côte d’Ivoire are using the agreements as a gateway to larger markets among their African neighbours, which will allow them to grow their national industries before looking to other international markets in a significant way. Does the Minister see such goals as significant in the domestic economy of Côte d’Ivoire? Are those goals hampered by this being a single agreement with Côte d’Ivoire, without any additional African benefit? As with the Cameroon agreement, will the Minister confirm whether he has ambitions for an economic agreement covering not just goods but services? Does she feel that the reduction in the tariffs over 15 years on certain manufactured products that could drive the Côte d’Ivoire economy is being done over an appropriate period? We have heard about the case of the central African EPA, and the Côte d’Ivoire agreement will be negligible in its impact on UK imports and investment.
It would also be useful to know when the Minister last met the relevant trade Ministers from each country to ascertain what assistance they need to make best use of these agreements. It is vital that the interests of Cameroon and Côte d’Ivoire are central to the legislation. I am keen to find out whether the Minister’s department works closely with colleagues in DfID on such matters.
Sheffield Forgemasters
Debate between Lord Young of Norwood Green and Baroness Wilcox
Lord Young of Norwood Green
Since the issue is one of affordability and value for money, will the Minister confirm that the Government will publish the value-for-money case?
Baroness Wilcox
The trouble with the party on the other side is that it misunderstands what “affordability” means or implies. As I have said, the Government inherited a massive and growing debt. If that had been allowed to grow beyond control, every company in the country would have had to face the risk of a disastrous rise in borrowing costs and there might have been even less money to borrow from the banks.
Communications Act 2003 (Maximum Penalty for Persistent Misuse of Network or Service) Order 2010
Debate between Lord Young of Norwood Green and Baroness Wilcox(14 years, 5 months ago)
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the order before the Committee aims to strengthen both consumer protection and the regulatory regime concerning persistent misuse of an electronic communications network or service. It covers a number of misuses but focuses primarily on silent and abandoned calls. Misuse, as defined in the Communications Act 2003, is when a person uses an electronic communications network or service such that it causes another person unnecessary annoyance, inconvenience or anxiety. Examples of misuse other than from silent and abandoned calls include the misuse of automated calling systems, number scanning, misuse of a calling line identification facility, misuse for dishonest gain and misuse of allocated telephone numbers.
The order attempts to ensure that consumers are more adequately protected from misuse, especially silent and abandoned calls, and so makes the following provision: it raises from £50,000 to £2 million the maximum penalty which Ofcom can impose on anyone who persistently misuses electronic communications networks or services.
Silent and abandoned calls are usually made by marketing companies, which use a computerised calling device that dials a telephone number and automatically transfers the call to an available sales agent whenever a call is answered. If, however, no agent is available, the line is disconnected, which results in the consumer receiving an abandoned call. If no recorded information message is played, it becomes a silent call. Your Lordships will no doubt appreciate that such calls are very annoying and can cause distress, especially to vulnerable consumers. The fact that a caller’s number is often withheld only adds to people’s anxiety or frustration.
Such calls may also be generated by other organisations, whether in financial services or market research, or by companies engaged in number scanning activities, which dial a sequence of telephone numbers to find out which ones are in service; their purpose is to develop a “clean list” of numbers with commercial value.
The impact of silent calls is more than anecdotal. Research undertaken by Ofcom between December 2009 and March 2010 found that 73 per cent of respondents were very or fairly inconvenienced by silent calls. More than 5,000 consumers contacted BT’s nuisance calls bureau in the three months to June this year. In the past month alone there have been more than 12,000 callers to the bureau who listened to recorded advice about silent calls. In the first half of 2010, Ofcom received 2,500 complaints about silent calls. I am sure, therefore, that your Lordships will agree that there is indeed a need for us to take effective action to protect consumers from unwanted calls.
Last year, Ofcom asked the Government to consider raising the maximum penalty for persistent misuse from £50,000 to £2 million. Ofcom considered that the current maximum penalty was not high enough to serve as a real sanction or effective deterrent to those who persistently make silent and abandoned calls to consumers. In 2008 Ofcom dealt with a serious case, where Barclaycard was found to have made an extremely large number of silent calls over an eight-month period. Ofcom was constrained in only being able to issue the £50,000 maximum penalty.
Ofcom has other penalty powers. These include turnover-based broadcasting powers, which it used in relation to the premium rate service phone-in scandal when GMTV was fined £2 million. Ofcom's view is that although harm is difficult to quantify in relation to silent calls, in that there is no financial loss, vulnerable consumers may still suffer. In such circumstances, a £2 million maximum penalty does not seem unreasonable.
Indeed, a 12-week public consultation, which ran from 26 October 2009, found respondents overwhelmingly in favour of increasing the maximum penalty to £2 million. We believe that the proposed maximum penalty will provide a more substantial deterrent to most call centres that employ up to 400 employees. Although it is possible that larger call centres may not be fully deterred, it is likely that the adverse media attention of a £2 million penalty will deter the most persistent offenders from making silent and abandoned calls.
Ofcom will work on a case-by-case basis where enforcement is necessary, taking a firm but flexible approach towards those who make silent and abandoned calls or engage in other forms of persistent misuse. Ofcom will monitor complaints and other cases that it receives. It will work closely with the different nuisance call bureaux to identify trends in silent and abandoned call rates, as well as the organisations making such calls. Where appropriate, Ofcom will use its formal powers to require information and is committed to taking decisive action, including the use of financial penalties wherever appropriate.
One of Ofcom’s main duties is to act in the interests of consumers. Under the Communications Act 2003, Ofcom can take enforcement action when it has reasonable grounds for believing that someone has engaged in persistent misuse. Under Section 128 of the Act, it can issue a financial penalty to any organisation that it notifies, and it can notify a company whenever it has sufficient evidence to indicate that the company has not acted in accordance with its policy on silent and abandoned calls. The penalty level is assessed, taking careful account of the extent of the identified misuse, and this increased maximum penalty level will allow Ofcom to impose a more proportional penalty to better fit the seriousness of the offence. The order will ensure that consumers are better protected from silent and abandoned calls, by implementing a higher, more appropriate penalty that is more consistent with the harm that the calls generate. Additionally, the order will help to reduce the need for some consumers to purchase, at their own expense, devices that combat silent and abandoned calls. I beg to move.
Lord Young of Norwood Green
My Lords, I welcome the order, which is hardly surprising as the previous Government initiated this legislation. We have been playing this role quite often recently. I also welcome the comments of the Minister. As she indicated, the aim is to deter, by ensuring that the cost of compliance is less than that of non-compliance, at least in most cases. Automated dialling that leads to silent and abandoned calls causes anxiety and distress. Since 2007, there have been a number of cases involving large and well known companies—I will not name them all—and a high-profile case that the Minister did name in which Ofcom imposed the maximum penalty but would have gone further.
I will make a couple of points. How will companies be informed of the increase in the penalty? We hope that publicising the change will form part of the deterrent programme. I welcome Ofcom’s monitoring review and the guidance and education procedures. However, will Ofcom require companies that use this equipment to confirm in writing that their procedures have been checked and are fully compliant?
Baroness Wilcox
My Lords, I thank the Committee for its consideration of the draft instrument today. I think we have all agreed that this is an important issue, and I have been interested in the questions that have arisen from it. The noble Lord, Lord Young, rightly says that during his time as Minister he did a lot of work on this, and I am really only finishing the work that he started. I am delighted to do so today.
The noble Lord asked two questions. One was how people are going to be informed of the increase in the penalty. I am told that this will be publicised by BIS and Ofcom, and that Ofcom has a statement on persistent misuse on its website, which is kept updated. I do not know if that is the best that it could do; I am always worried that decisions are taken and then not best spread in the ways that we would hope. I sometimes wonder why we do not use magazines more often; we all read magazines, books and so on, and there are many other ways of doing this rather than just electronically. It is a good question and I would like to see a better answer than this, from us and from Ofcom.
The noble Lord’s second question was about requiring companies to confirm in writing that they are fully compliant. Companies are required to abide by Ofcom’s persistent misuse guidelines, which they receive on their website. Those are the answers to both his questions, which I hope he will find partially satisfactory.
Lord Young of Norwood Green
The companies get the guidance, but that is not confirmation. I cannot help feeling that if Ofcom knows which companies are using this equipment, it ought to get some confirmation from them that they have current procedures that have been checked and are fully compliant. That would not necessarily mean that the answer was totally correct but at least it would force them to answer that, rather than Ofcom just assuming, because its guidance is available, that companies are aware of this. I offer that as a possible reinforcement.
Baroness Wilcox
I thank the noble Lord. I would like to point this out to the Information Commissioner and see if he cannot study this and come up with some better answers.
My noble friend Lord Razzall asked two questions. He reminded us all about the calls from “heavy breathers” before this technology was developed. As a woman picking up a telephone, in the days before I went ex-directory, I have heard a heavy breather on the other end.
National Minimum Wage Regulations 1999 (Amendment) Regulations 2010
Debate between Lord Young of Norwood Green and Baroness Wilcox
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I am pleased to present these regulations to the House. My Government are committed to the national minimum wage as we believe that it gives protection to low-income workers and provides incentives to work.
The regulations implement recommendations contained in the Low Pay Commission’s report of 2010. They do three things. First, they increase the hourly rate of the minimum wage for adults and younger workers, and they increase the maximum amount for living accommodation that is allowed to count towards pay for minimum wage purposes. Secondly, they provide that from 1 October this year, 21 year-olds are eligible for the adult rate of the minimum wage. Thirdly, they remove the existing exemption from the minimum wage for apprentices who are either aged under 19 or aged 19 or over and in the first year of their apprenticeship. The regulations replace that exemption with a new apprenticeship minimum wage rate.
I turn first to the increases in the minimum wage rates contained in Regulations 3, 5 and 6. The Low Pay Commission recommended that the adult minimum wage rate should increase by 2.2 per cent in October. We believe that this increase strikes the right balance between ensuring that low-paid workers are treated fairly and preventing adverse economic effects. It is based on sound evidence and consultation, and takes into account the present economic circumstances.
The commission considered carefully the position of young workers in the labour market. It found that the employment prospects for younger workers have deteriorated consistently over a period of years, with a more substantial decline during the recession. For that reason, it concluded that it was appropriate to increase the youth rates by slightly lower proportions than the adult rate. We consider that this is the right approach.
That brings me on to the treatment of 21-year-olds. The Low Pay Commission has consistently recommended that they should be entitled to the adult minimum wage. The commission looked again at all the evidence in its 2010 report and continues to believe that the adult rate should start at 21. The Government have accepted that view.
It is, of course, important that any changes to the rules on entitlement to the minimum wage should not adversely affect people’s employment prospects. I do not consider that starting the adult rate at 21 would do so. Around 90 per cent of 21 year-olds are already paid at or above the adult minimum wage rate, and earnings and employment data suggest that 21 year-olds are already more closely aligned to 22 year-olds than to their younger counterparts. Research undertaken for the Low Pay Commission concerning the effects on labour-market behaviour of people turning 22 concluded that lowering the starting age of the adult rate to 21 would do little harm to their employment prospects.
We estimate that around 85,000 21 year-olds will benefit from this change and that it will increase labour costs by £48 million. In view of the small differential in earnings between low-paid 21 and 22 year-olds, we believe that the businesses affected should be able to absorb the additional costs imposed by this change.
The Low Pay Commission’s report reaffirmed its long-standing belief that lower minimum wage rates for younger workers are still justified to protect employment and, at the same time, reflect the training element attached to younger workers. We agree with this approach. There is little point in pushing wages up if it means that jobs are no longer available. Once young people are in work, they are gaining important skills and experience that will help them progress. They are not doing so if they are out of work.
The third area of change in the regulations relates to apprentices. At present, certain apprentices are not eligible for the minimum wage. Employed apprentices who are either under 19 or who are 19 or over and in the first year of their training are not eligible; neither are non-employed apprentices. The Low Pay Commission has carefully considered whether the treatment of waged apprentices is appropriate. It has concluded that there should be a new apprentice minimum wage rate of £2.50 per hour, and that this should apply to employed apprentices. We have accepted this recommendation. It is perhaps worth setting out the guiding principles that the commission used in designing the apprentice minimum wage. These are that such a wage should: support a competitive economy; be set at a prudent level; be simple and straightforward; and make a difference. We believe that the recommendations fully reflect these principles.
The new rate will apply only to employed apprentices who are either aged under 19, or who are over 19 and in the first year of their apprenticeship. These apprentices are either employed under a contract of apprenticeship or are engaged in certain government-funded apprenticeship schemes. However, the current exemptions from the minimum wage will continue to apply to non-employed apprentices, including those who may be receiving an allowance paid by the state instead of a wage.
Apprenticeships offer those who undertake them the prospect of higher future earnings and better employment prospects. We consider that the new apprentice minimum wage is measured and practical. It will provide important legal protection for apprentices without compromising the commitment of employers to providing apprenticeships.
The programme for government which we published in May stated that the Government are,
“inspired by the values of freedom, fairness and responsibility”.
The regulations before us today play their part in this. The changes to the minimum wage which they contain balance the needs of low-paid workers against the challenges that remain for businesses. They reflect our commitment to the fair treatment of low-paid workers as well as to business. I beg to move.
Lord Young of Norwood Green
My Lords, I welcome the Minister’s support for the previous Government’s proposals and what appears to be a Damascene conversion to the cause of the minimum wage. However, I do not wish to be churlish. The relevant adult rate was also proposed by the previous Government, and so I welcome it. The challenge for the Government in announcing 50,000 new apprenticeships is to create apprenticeships for 16 to 18 year-olds, which we always regarded as a key target area. I would welcome confirmation that the Government will not embrace the view of Mr Christopher Chope in the other place who proposed a Private Member’s Bill which would allow people to be paid below the minimum wage. I would welcome confirmation from the Government that they will not support that approach. Other than that, I welcome and support this statutory instrument.
Sunday Trading
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
My Lords, it is right that everybody should be able to choose the way they spend their day of rest, and there is no pressure for women to be looked at as a special case at this time. However, I am sure that, with the work that the noble Baroness has done on equality, she will bring anything to my attention that she feels we can do something about.
Lord Young of Norwood Green
My Lords, does the Minister recognise that in a multifaith and in many cases no-faith, multicultural and multiracial society, Sunday does not have the same significance for all people? Can she also confirm that employees and workers will maintain their right under current employment law not to work on Sundays?
Student Loans Company
Debate between Lord Young of Norwood Green and Baroness Wilcox
Baroness Wilcox
My Lords, the Student Loans Company has made a number of improvements in the way it processes applications, which I hope will improve customers’ experience. The scanning technology that was at the heart of the processing problems last year has been moved from Glasgow to Darlington where the processing teams are based so that all paper documentation is sent to one location, allowing the Student Loans Company to react quickly to any problems. A more user-friendly online application process has been introduced for new and returning students. Applications for disabled students’ allowances are now being turned around faster, and in consultation with stakeholders—who have proved to be an invaluable support to us—the Student Loans Company has streamlined its processes for dealing with these applications. That includes a fourfold increase in the number of staff allocated to the work, with better training and quality assurance to ensure consistency in the service provided to its customers.
Lord Young of Norwood Green
My Lords, I welcome the assurances given by the Minister. Can she confirm that arrangements have been put in place to enable contacts between disability groups and the Student Loans Company? My experience of going around universities suggests that they bend over backwards to assist potential students with disabilities.
Baroness Wilcox
I am sorry, I rather thought I had answered that. We have set up a special group for all the outside groups that need to consult, and we have made sure that we have a chairman who is from their number rather than from our own.
Competition Act 1998 (Land Agreements Exclusion Revocation) Order 2010
Debate between Lord Young of Norwood Green and Baroness Wilcox
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the Government's position is that this exclusion order is no longer necessary or appropriate and that its revocation would benefit both UK consumers and businesses. Effective competition in markets promotes productivity, competitiveness and innovation. It ensures that consumers are offered the best products at the most competitive prices.
Chapter 1 of the Competition Act 1998 promotes competition by making it illegal for enterprises to agree to share markets, fix prices or restrict new players from entering markets. The law applies across all areas of the economy. At present, however, there is in place an exceptional exclusion for land agreements. That was introduced when the Competition Act first came into effect, mainly for practical reasons.
Before the introduction of the Competition Act 1998, land agreements were generally deemed not to be covered by competition law. The aim was to capture them under the new regime, but to avoid a situation where uncertainty about their legal position might prompt a large number of parties to submit agreements to the Office of Fair Trading for approval. The vast majority of land agreements would have raised no competition problems, and would have forced the OFT to commit resources to non-essential work instead of tackling genuine competition concerns.
To avoid this, the exclusion order deemed land agreements compatible with the Chapter 1 prohibition unless and until they were found not to be—at which point the benefit of the exclusion could be withdrawn. As the result of reforms made to competition law in 2004, this concern about a deluge of unnecessary notifications is no longer an issue.
Since 2004, parties to agreements may not seek prior approval of them from the OFT. Instead, and drawing on published OFT guidance, parties must carry out a self-assessment of agreements and satisfy themselves that they do not restrict competition. Assuming that an agreement has no such effect—and most do not—it is simply legal.
In these circumstances the Government see no practical reason to maintain the exclusion for land agreements, and there is no reason of principle why land agreements, in particular, should be excluded from the application of the Chapter 1 prohibition. As the Competition Commission made clear in its report on the groceries sector, land agreements are capable of restricting market entry and damaging competition. On the contrary, there is a real prospect that the continued existence of the exclusion order may encourage parties to land agreements to assume, wrongly, that they do not need to assess their impact on competition.
We want to remove any confusion or doubt about whether land agreements are subject to competition law, and to make it absolutely clear that the validity of such agreements can and will be challenged if they appear to involve a restriction of competition. At present, any land agreement found to restrict competition in markets must be amended accordingly. But removing the exclusion will mean that serious sanctions could be imposed if a land agreement is found to breach the Chapter 1 prohibition, as is already the case in respect of all other agreements. This would provide a strong incentive on parties to make sure that their agreements are compliant with the law, protecting consumers against anti-competitive conduct.
I know that some parties have expressed concern about the burdens associated with having to ensure that land agreements are compatible with the law. However, this is the same burden that applies to every other type of agreement. In reality, parties to land agreements should already have undertaken work to make certain that agreements are properly compatible with the Chapter 1 prohibition. The fact that some parties may not have done so demonstrates the value of bringing clarity to this area of the law.
To help businesses adjust, we are delaying implementation of the order’s revocation until 6 April 2011. The OFT will also provide updated guidance on how competition law applies to land agreements as a way of helping business respond to the change.
In conclusion, I simply reiterate that the purpose of the exclusion order was never to provide legal cover to agreements that restrict competition in markets. It was introduced for what were valid practical reasons but which no longer apply. It now makes sense to correct an unnecessary anomaly. Through consistent application of the law, we can better promote effective competition across our economy. On those grounds, I trust that noble Lords will agree to our recommendation and approve this order.
Lord Young of Norwood Green
My Lords, on this occasion I find myself concurring with that superb analysis from the noble Baroness. I suppose that it is not surprising, given my previous association with my honourable friend in the other place, who was responsible for introducing this instrument.